<SEC-DOCUMENT>0001144204-15-001404.txt : 20150108
<SEC-HEADER>0001144204-15-001404.hdr.sgml : 20150108
<ACCEPTANCE-DATETIME>20150108162507
ACCESSION NUMBER:		0001144204-15-001404
CONFORMED SUBMISSION TYPE:	S-1/A
PUBLIC DOCUMENT COUNT:		4
FILED AS OF DATE:		20150108
DATE AS OF CHANGE:		20150108

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			Intellicheck Mobilisa, Inc.
		CENTRAL INDEX KEY:			0001040896
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-PREPACKAGED SOFTWARE [7372]
		IRS NUMBER:				113234779
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		S-1/A
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-201168
		FILM NUMBER:		15516698

	BUSINESS ADDRESS:	
		STREET 1:		191 OTTO STREET
		CITY:			PORT TOWNSEND
		STATE:			WA
		ZIP:			98368
		BUSINESS PHONE:		516-992-1900

	MAIL ADDRESS:	
		STREET 1:		191 OTTO STREET
		CITY:			PORT TOWNSEND
		STATE:			WA
		ZIP:			98368

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	Intelli Check Mobilisa, Inc
		DATE OF NAME CHANGE:	20080319

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	INTELLI CHECK INC
		DATE OF NAME CHANGE:	19990917
</SEC-HEADER>
<DOCUMENT>
<TYPE>S-1/A
<SEQUENCE>1
<FILENAME>v398344_s1a.htm
<DESCRIPTION>FORM S-1/A
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right"></P>

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    <TD NOWRAP STYLE="padding: 0; text-align: center"> As filed with the Securities and Exchange Commission on January 8, 2015 </TD>
    <TD NOWRAP STYLE="padding: 0; text-align: right"> <B>Registration No. 333-201168</B> </TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 12pt"><B>UNITED
STATES</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 12pt"><B>SECURITIES
AND EXCHANGE COMMISSION</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Washington, D.C. 20549</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B> Amendment No. 2 </B></P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><B>Form S-1</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">REGISTRATION STATEMENT</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">Under The Securities
Act of 1933</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;&nbsp;</P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><B>INTELLICHECK MOBILISA,
INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><I>(Exact name of
Registrant as specified in its Charter)</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%; text-align: center"><FONT STYLE="font-size: 10pt"><B>Delaware</B></FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 49%; text-align: center"><FONT STYLE="font-size: 10pt"><B>11-3234779</B></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><I>(State or Other Jurisdiction of Incorporation or Organization)</I></FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><I>(I.R.S. Employer Identification No.)</I></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>191 Otto Street</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Port Townsend, Washington</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>98368</B></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><I>(Address of Principal Executive Offices)</I></FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><I>(Zip Code)</I></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">Primary Standard Classification Code Number:</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Registrant&rsquo;s telephone number,
including area code: (360) 344-3233</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">William H. Roof, Ph.D.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Chief Executive Officer</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Intellicheck Mobilisa, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">191 Otto Street</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Port Townsend, WA 98368</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(360) 344-3233</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Name, address, including zip code, and
telephone number, including area code, of agent for service)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Copies to:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" ALIGN="CENTER" STYLE="font: 10pt Times New Roman, Times, Serif; width: 70%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%; text-align: center"><FONT STYLE="font-size: 10pt">Christopher H. Cunningham</FONT></TD>
    <TD STYLE="width: 50%; text-align: center"><FONT STYLE="font-size: 10pt">Mitchell S. Nussbaum</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">K&amp;L Gates LLP</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">Loeb &amp; Loeb LLP</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">925 Fourth Avenue</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">345 Park Avenue</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">Seattle, WA 98104</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">New York, NY 10154</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">(206) 370-7639</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">(212) 407-4159</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Approximate date of
commencement of proposed sale to the public: <B>As soon as practicable after the effective date of this registration statement.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If any of the securities
being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, as amended, check the following box. <FONT STYLE="font-family: Wingdings">&uml;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If this Form is filed
to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
<FONT STYLE="font-family: Wingdings">&uml;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If this Form is a
post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration statement for the same offering. <FONT STYLE="font-family: Wingdings">&uml;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If this form is a
post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration statement for the same offering. <FONT STYLE="font-family: Wingdings">&uml;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">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 definitions of &ldquo;large accelerated filer&rdquo;, &ldquo;accelerated filer&rdquo; and &ldquo;smaller reporting
company&rdquo; in Rule 12b-2 of the Exchange Act. (Check one):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6.6pt; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 65%; padding-left: 0.5in"><FONT STYLE="font-size: 10pt">Large accelerated filer <FONT STYLE="font-family: Wingdings">&uml;</FONT></FONT></TD>
    <TD STYLE="width: 35%"><FONT STYLE="font-size: 10pt">Accelerated filer <FONT STYLE="font-family: Wingdings">&uml;</FONT></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.5in"><FONT STYLE="font-size: 10pt">Non-accelerated filer&nbsp;<FONT STYLE="font-family: Wingdings">&uml;</FONT>&nbsp;(Do
    not check if a smaller reporting company)</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Smaller reporting company <FONT STYLE="font-family: Wingdings">x</FONT></FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>The registrant
hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such
date as the Commission, acting pursuant to said Section 8(a), may determine.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in; color: red"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in; color: red"><B>The
information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is
not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: Black 1pt solid; border-top: Black 1pt solid; padding-top: 6pt; padding-bottom: 6pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; color: red"><B>Preliminary
    Prospectus</B></FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; border-top: Black 1pt solid; padding-top: 6pt; padding-bottom: 6pt; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; color: red"><B>Subject
    to completion</B></FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; border-top: Black 1pt solid; padding-top: 6pt; padding-bottom: 6pt; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; color: red"><B> Dated
    January 8, 2015 </B></FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in"><FONT STYLE="font-size: 12pt"><B>Shares</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 12pt"><B>Common Stock</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><IMG SRC="tlogo.jpg" ALT=""></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are offering up to&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock pursuant to this prospectus to be sold in this offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> &nbsp; </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> Our common stock is listed on the NYSE MKT LLC under the
symbol &ldquo;IDN.&rdquo; On January 7, 2015, the last reported sale price of our common stock was $2.66 per share. </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Our business and an investment
in our securities involves a high degree of risk. See &ldquo;Risk Factors&rdquo; beginning on page 4 of this prospectus for
a discussion of information that should be considered in connection with an investment in our common stock.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Neither the Securities and Exchange
Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal offense.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt"><B>Per&nbsp;Share</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt"><B>Total</B></FONT></TD></TR>
<TR STYLE="background-color: rgb(204,238,255)">
    <TD STYLE="vertical-align: top; padding-left: 12pt; text-indent: -12pt"><FONT STYLE="font-size: 10pt"><B>Public offering price</B></FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">$</FONT></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top; padding-left: 12pt; text-indent: -12pt"><FONT STYLE="font-size: 10pt"><B>Underwriting discounts
    and commissions<SUP>(1)</SUP></B></FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">$</FONT></TD></TR>
<TR STYLE="background-color: rgb(204,238,255)">
    <TD STYLE="vertical-align: top; padding-left: 12pt; text-indent: -12pt"><FONT STYLE="font-size: 10pt"><B>Proceeds, before
    expenses, to us</B></FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">$</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0">(1) Does not
include a non-accountable expense allowance equal to 0.5% of the gross proceeds of this offering payable to Aegis Capital Corp.,
the representative of the underwriters. See &ldquo;Underwriting&rdquo; for a description of compensation payable to the underwriters.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have granted a 45-day option to the
representative of the underwriters to purchase up to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; additional shares
of common stock solely to cover over-allotments, if any.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The underwriters expect to deliver our
shares to purchasers in the offering on or about &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2015.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Aegis Capital Corp</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I>&nbsp;</I></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

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<P STYLE="margin-top: 0; margin-bottom: 0; font-size: 1px; color: White"></P>

<P STYLE="margin: 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TABLE OF CONTENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 94%">&nbsp;</TD>
    <TD STYLE="width: 6%; text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 10pt"><B>Page</B></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><A HREF="#s1_1"><FONT STYLE="font-size: 10pt">Prospectus Summary</FONT></A></TD>
    <TD STYLE="text-align: right; vertical-align: bottom">1</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD><A HREF="#s1_2"><FONT STYLE="font-size: 10pt">Summary Financial Data</FONT></A></TD>
    <TD STYLE="text-align: right; vertical-align: bottom">4</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><A HREF="#s1_3"><FONT STYLE="font-size: 10pt">Risk Factors</FONT></A></TD>
    <TD STYLE="text-align: right; vertical-align: bottom">5</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD><A HREF="#s1_4"><FONT STYLE="font-size: 10pt">Cautionary Statement Regarding Forward Looking Statements</FONT></A></TD>
    <TD STYLE="text-align: right; vertical-align: bottom">13</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><A HREF="#s1_5"><FONT STYLE="font-size: 10pt">Use of Proceeds</FONT></A></TD>
    <TD STYLE="text-align: right; vertical-align: bottom">14</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD><A HREF="#s1_6"><FONT STYLE="font-size: 10pt">Market Price of Common Stock</FONT></A></TD>
    <TD STYLE="text-align: right; vertical-align: bottom">14</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><A HREF="#s1_7"><FONT STYLE="font-size: 10pt">Dividend Policy</FONT></A></TD>
    <TD STYLE="text-align: right; vertical-align: bottom">14</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD><A HREF="#s1_8"><FONT STYLE="font-size: 10pt">Capitalization</FONT></A></TD>
    <TD STYLE="text-align: right; vertical-align: bottom">15</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><A HREF="#s1_9"><FONT STYLE="font-size: 10pt">Dilution</FONT></A></TD>
    <TD STYLE="text-align: right; vertical-align: bottom">16</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD><A HREF="#s1_10"><FONT STYLE="font-size: 10pt">Selected Financial Data</FONT></A></TD>
    <TD STYLE="text-align: right; vertical-align: bottom">17</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><A HREF="#s1_11"><FONT STYLE="font-size: 10pt">Management&rsquo;s Discussion and Analysis of Financial Condition and Results of Operations</FONT></A></TD>
    <TD STYLE="text-align: right; vertical-align: bottom">19</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD><A HREF="#s1_12"><FONT STYLE="font-size: 10pt">Business</FONT></A></TD>
    <TD STYLE="text-align: right; vertical-align: bottom">27</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><A HREF="#s1_13"><FONT STYLE="font-size: 10pt">Employees</FONT></A></TD>
    <TD STYLE="text-align: right; vertical-align: bottom">43</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD><A HREF="#s1_14"><FONT STYLE="font-size: 10pt">Management</FONT></A></TD>
    <TD STYLE="text-align: right; vertical-align: bottom">44</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><A HREF="#s1_15"><FONT STYLE="font-size: 10pt">Executive Compensation</FONT></A></TD>
    <TD STYLE="text-align: right; vertical-align: bottom">47</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD><A HREF="#s1_16"><FONT STYLE="font-size: 10pt">Certain Relationships and Related Party Transactions</FONT></A></TD>
    <TD STYLE="text-align: right; vertical-align: bottom">55</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><A HREF="#s1_17"><FONT STYLE="font-size: 10pt">Principle Stockholders</FONT></A></TD>
    <TD STYLE="text-align: right; vertical-align: bottom">55</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD><A HREF="#s1_18"><FONT STYLE="font-size: 10pt">Description of Capital Stock</FONT></A></TD>
    <TD STYLE="text-align: right; vertical-align: bottom">56</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><A HREF="#s1_19"><FONT STYLE="font-size: 10pt">Shares Eligible for Future Sale</FONT></A></TD>
    <TD STYLE="text-align: right; vertical-align: bottom">59</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD><A HREF="#s1_21"><FONT STYLE="font-size: 10pt">Underwriting</FONT></A></TD>
    <TD STYLE="text-align: right; vertical-align: bottom">61</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><A HREF="#s1_22"><FONT STYLE="font-size: 10pt">Legal Matters</FONT></A></TD>
    <TD STYLE="text-align: right; vertical-align: bottom">68</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD><A HREF="#s1_23"><FONT STYLE="font-size: 10pt">Experts</FONT></A></TD>
    <TD STYLE="text-align: right; vertical-align: bottom">68</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><A HREF="#s1_24"><FONT STYLE="font-size: 10pt">Where You Can Find More Information</FONT></A></TD>
    <TD STYLE="text-align: right; vertical-align: bottom">68</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD><A HREF="#s1_25"><FONT STYLE="font-size: 10pt">Index to Financial Statements</FONT></A></TD>
    <TD STYLE="text-align: right; vertical-align: bottom">69</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We have not authorized anyone to provide
you with any information or to make any representation, other than those contained in this prospectus or any free writing prospectus
we have prepared. We take no responsibility for, and provide no assurance as to the reliability of, any other information that
others may give you. This prospectus is an offer to sell only the shares offered hereby, but only in circumstances and in jurisdictions
where it is lawful to so do. The information contained in this prospectus is accurate only as of its date, regardless of the time
of delivery of this prospectus or of any sale of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Neither we nor any of the underwriters
have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction or distribution
of this prospectus in any jurisdiction where action for that purpose is required, other than the United States. You are required
to inform yourself about, and to observe any restrictions relating to, this offering and the distribution of this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<DIV STYLE="border: Black 1pt solid; padding: 5pt; margin-right: 5pt">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><A NAME="s1_1"></A>PROSPECTUS SUMMARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>This summary highlights selected information
contained elsewhere in or incorporated by reference into this prospectus and does not contain all of the information that you
should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire
prospectus, including our financial statements and the related notes included elsewhere in this prospectus. You should also consider,
among other things, the matters described under &ldquo;Risk Factors&rdquo; and &ldquo;Management&rsquo;s Discussion and Analysis
of Financial Condition and Results of Operations,&rdquo; in each case appearing elsewhere in this prospectus. Unless otherwise
stated, all references to &ldquo;us,&rdquo; &ldquo;our,&rdquo; &ldquo;Intellicheck Mobilisa,&rdquo; &ldquo;we,&rdquo; the &ldquo;Company&rdquo;
and similar designations refer to Intellicheck Mobilisa, Inc.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Business Overview </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are a technology company engaged in
developing, integrating and marketing wireless technology and identity systems for various applications including mobile and handheld
access control and security systems for the government, military and commercial markets. Our products include the Defense ID and
Fugitive Finder systems, advanced ID card access control products currently protecting military and federal locations, and ID-Check,
a patented technology that instantly reads, analyzes, and verifies encoded data in magnetic stripes and barcodes on government-issue
IDs from U.S. and Canadian jurisdictions designed to improve the customer experience for the financial, hospitality and retail
sectors. We are also engaged in the engineering, design and installation of wireless communications systems.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We plan to expand our business in the
near term by pursuing a research and development strategy designed to move our technologies into new product markets that are
expected to benefit from enhanced safety, regulatory compliance and fraud prevention. For example, we anticipate
extending our technologies into the healthcare and first responder spaces and to online applications to provide enhanced
safety, regulatory compliance and fraud prevention for the billions of transactions that occur there each day.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As a complement to these new
offerings, we are also developing a data analytics platform to analyze the data we capture and to provide meaningful data,
trend and predictive analysis to a variety of customers in the commercial and government spaces.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We plan to leverage our IP in the new
markets we are targeting to strengthen our competitive position.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our primary businesses include
Identity Systems products, which include commercial applications of identity card reading and verification and government
sales of defense security and identity card applications, and the development of wireless security applications. Our
technologies address problems such as:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27.5pt; text-indent: -24.2pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Commercial
                                         Fraud and Risk Management &ndash; which may lead to economic losses to merchants from
                                         check cashing, debit and credit card, as well as other types of fraud such as identity
                                         theft that principally use fraudulent identification cards as proof of identity;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Instant Credit
                                         Card Approval &ndash; retail stores use our technology to scan a Driver&rsquo;s License
                                         at a kiosk or at the Point Of Sale (POS) and send the information to a credit card underwriter
                                         to get instant approval for a loyalty-branded credit card. This technique protects consumer
                                         data and is significantly more likely to result in a completed transaction compared to
                                         in-store personnel asking customers to fill out a paper form;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Unauthorized
                                         Access &ndash; our systems and software are designed to increase security and deter terrorism
                                         at airports, shipping ports, rail and bus terminals, military installations, high profile
                                         buildings and infrastructure where security is a concern;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Inefficiencies
                                         Associated With Manual Data Entry &ndash; by reading encoded data contained in the bar
                                         code and magnetic stripe of an identification card with a quick swipe or scan of the
                                         card, where permitted by law, customers are capable of accurately and instantaneously
                                         inputting information into forms, applications and the like without the errors associated
                                         with manual data entry;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Marine Environment
                                         Communications &ndash; our Wireless Over Water&reg; technology allows for instant communication
                                         between multiple points, both on land and at sea, across wide, over-water expanses and
                                         optimizes performance by taking into account sea state and Fresnel zones (Fresnel zones
                                         result from obstructions in the path of radio waves and impact the signal strength of
                                         radio transmissions); and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Wireless Network
                                         Design and Hazard Assessment &ndash; our AIRchitect&reg; tool designs optimum wireless
                                         networks based on user parameters and location architecture, and our Radiation Hazard
                                         (RADHAZ) tool identifies and assesses radio frequency (RF) exposure.</TD></TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

</DIV>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<DIV STYLE="margin-right: 5pt; padding: 5pt; border: Black 1pt solid">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><B>&nbsp;&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Corporate Information</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We were originally incorporated in the
state of New York in 1994 as Intelli-Check, Inc. In August 1999, we reincorporated in Delaware. On March 14, 2008, we changed
our name to Intelli-Check - Mobilisa, Inc. after the consummation of the merger with Mobilisa, Inc. (&ldquo;Mobilisa&rdquo;).
At the closing of the merger, our headquarters were moved to Mobilisa&rsquo;s offices in Port Townsend, Washington. On October
27, 2009, we effected a further change in our name to Intellicheck Mobilisa, Inc.. On August 31, 2009, the Company acquired 100%
of the common stock of Positive Access Corporation (&ldquo;Positive Access&rdquo;), a developer of driver license reading technology.
The acquisition of Positive Access expanded the Company&rsquo;s technology portfolio and related product offerings and allowed
the Company to reach a larger number of customers through Positive Access&rsquo;s extensive distribution network. Our principal
executive office is located at 191 Otto Street, Port Townsend, Washington 98368. Our telephone number is (360)&nbsp;344-3233 and
our website address is www.icmobil.com. The information on our website is not a part of, and should not be construed as being
incorporated by reference into, this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">All references to shares of our common
stock take into account a one for eight reverse split of our common stock effected August 12, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

</DIV>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="margin-top: 0; margin-bottom: 0"></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<DIV STYLE="margin-right: 5pt; padding: 5pt; border: Black 1pt solid">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><B>The Offering</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 1in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%; padding: 1.5pt; text-align: justify"><FONT STYLE="font-size: 10pt">Securities&nbsp;offered by us:</FONT></TD>
    <TD STYLE="width: 2%; padding: 1.5pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 48%; padding: 1.5pt; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding: 1.5pt; text-align: justify"><FONT STYLE="font-size: 10pt">Common stock to be outstanding after this offering:</FONT></TD>
    <TD STYLE="padding: 1.5pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding: 1.5pt; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares.
    If the underwriters exercise their option to purchase additional shares in full, the total number of shares of common stock
    outstanding immediately after this offering would
    be&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding: 1.5pt; text-align: justify"><FONT STYLE="font-size: 10pt">Underwriters&rsquo; option to purchase additional
    shares:</FONT></TD>
    <TD STYLE="padding: 1.5pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding: 1.5pt; text-align: justify"><FONT STYLE="font-size: 10pt">We have granted the representative of the underwriters
    a 45-day option to purchase from us up to an additional&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of our common stock at the public offering price, less underwriting discounts and commissions.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding: 1.5pt; text-align: justify"><FONT STYLE="font-size: 10pt">Use of proceeds by us:</FONT></TD>
    <TD STYLE="padding: 1.5pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding: 1.5pt; text-align: justify"><FONT STYLE="font-size: 10pt">We intend to use the net proceeds of this offering
    to expand research and development and sales and marketing groups and to implement further measures to protect our intellectual
    property. See &ldquo;Use of Proceeds&rdquo; on page 13 for further information.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding: 1.5pt; text-align: justify"><FONT STYLE="font-size: 10pt">Risk factors:</FONT></TD>
    <TD STYLE="padding: 1.5pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding: 1.5pt; text-align: justify"><FONT STYLE="font-size: 10pt">You should carefully read &ldquo;Risk Factors&rdquo;
    in this prospectus for a discussion of factors that you should consider before deciding to invest in our common stock.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 12.2pt; text-indent: -12.2pt"><FONT STYLE="font-size: 10pt">NYS MKT LLC trading symbol </FONT></TD>
    <TD STYLE="padding: 1.5pt">&nbsp;</TD>
    <TD STYLE="padding: 1.5pt"><FONT STYLE="font-size: 10pt">IDN </FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0"> Unless we indicate otherwise, all information
in this prospectus is based on 4,934,601 shares of common stock outstanding as of January 7, 2015 and: </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>assumes no
                                         exercise by the underwriters of their option to purchase up to an additional&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
                                         of common stock to cover over-allotments, if any;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>excludes 235,478
                                         shares of our common stock issuable upon exercise of outstanding stock options under
                                         our equity incentive plans at a weighted average exercise price of $5.95 per share, with
                                         76,291 shares remaining available for future grant under such plans; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>excludes 48,625
                                         shares of our common stock issuable upon exercise of warrants with an exercise price
                                         of $4.48 per share, and 16,356 shares of our common stock issuable upon exercise of warrants
                                         with an exercise price of $8.00 per share.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

</DIV>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<DIV STYLE="margin-right: 5pt; padding: 5pt; border: Black 1pt solid">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="s1_2"></A><B>SUMMARY FINANCIAL DATA</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">The following summary financial data for
the years ended December 31, 2013 and 2012 are derived from our audited financial statements included elsewhere in this prospectus.
The summary financial data for the nine months ended September 30, 2014 and 2013 have been derived from our unaudited financial
statements included elsewhere in this prospectus. These unaudited financial statements have been prepared on a basis consistent
with our audited financial statements and, in our opinion, contain all adjustments, consisting only of normal and recurring adjustments,
necessary for a fair presentation of such financial data. You should read this data together with our audited financial statements
and related notes included elsewhere in this prospectus and the information under the captions &ldquo;Selected Financial Data&rdquo;
and &ldquo;Management&rsquo;s Discussion and Analysis of Financial Condition and Results of Operations.&rdquo; Our historical
results are not necessarily indicative of our future results, and our operating results for the nine-month period ended September
30, 2014 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2014 or any
other interim periods or any future year or period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Years&nbsp;Ended&nbsp;December&nbsp;31,</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Nine&nbsp;Months<BR> Ended<BR> September&nbsp;30,</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2014</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">(unaudited)</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="14" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 10pt">(In&nbsp;thousands,&nbsp;except&nbsp;per&nbsp;share&nbsp;data) <SUP>(1)</SUP></FONT></TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left">Statement of Operations Data:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 48%">Revenue</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">8,803</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">7,298</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">5,932</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">5,507</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Loss from operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,261</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,424</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,824</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,684</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Net loss</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,260</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,424</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,824</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,683</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>Net loss per common share</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9.75pt">Basic</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(0.65</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(0.70</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(0.53</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(0.35</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 9.75pt">Diluted</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(0.65</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(0.70</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(0.53</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(0.35</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Common shares used in computing per share amounts</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 9.75pt">Basic</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,465</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,487</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,471</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,757</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9.75pt">Diluted</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,465</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,487</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,471</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,757</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"><B>Balance Sheet Data:</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center">As of September 30, 2014</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Actual</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt"><B>As Adjusted<FONT STYLE="font-family: Times New Roman, Times, Serif"><SUP>(2)</SUP></FONT></B></FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">(In thousands)</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 74%; text-align: left; padding-bottom: 2.5pt">Cash and cash equivalents</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 2.5pt double; text-align: right">3,067</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 2.5pt double; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Working capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,942</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Stockholders&rsquo; (deficit) equity:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Preferred stock, $0.01 par value; 1,000 shares authorized; none issued and outstanding</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Common stock, $0.001 par value; 40,000 shares authorized;&nbsp;&nbsp; 4,932 shares issued and outstanding actual,&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;number of shares issued and outstanding pro forma</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Additional paid-in capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">106,265</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Accumulated other comprehensive loss</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Accumulated deficit</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(87,339</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Total stockholders&rsquo; equity</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">18,931</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total capitalization</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">18,931</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">___________________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(1) Share data reflects the one for eight reverse split effected August 12, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> (2) The as adjusted column in the balance sheet data table
above gives effect to the sale and issuance by us of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares of&nbsp; common stock
in this offering based upon the public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share after deducting estimated underwriting
discounts and commissions and estimated offering expenses payable by us. </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

</DIV>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="s1_3"></A><B>RISK FACTORS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><I>You should carefully consider the risks
described below, together with all of the other information in this prospectus, before making an investment decision. The risks
described below are not the only ones we face. Additional risks we are not presently aware of or that we currently believe are
immaterial may also impair our business operations. Our business could be harmed by any of these risks. The trading price of our
common stock could decline due to any of these risks, and you may lose all or part of your investment. In assessing these risks,
you should also refer to the financial statements and related notes filed therewith.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Risks Relating to this Offering</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt"><B>Our share price may be volatile and
could decline substantially</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27.5pt"> The market price of our common stock,
like the price of shares of technology companies generally, has been and may continue to be volatile. From January 1, 2008 to
January 7, 2015 the closing price of our common stock has varied from a high of $32.08 to a low of $2.24 per share. Many factors
may cause the market price for our common stock to decline, including: </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 41.8pt; text-indent: -13.2pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>shortfalls
                                         in revenues, cash flows or continued losses from operations;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>delays in development
                                         or roll-out of any of our products;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>announcements
                                         by one or more competitors of new product acquisitions or technological innovations;
                                         and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>unfavorable
                                         outcomes from litigation.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27.5pt">In addition, the stock market experiences
extreme fluctuations in price and volume that particularly affect the market price of shares of emerging technology companies,
such as ours. These price and volume fluctuations are often unrelated or disproportionate to the operating performance of the
affected companies. Because of this volatility, we may fail to meet the expectations of our stockholders or of securities analysts,
and our stock price could decline as a result. Declines in our stock price for any reason, as well as broad-based market fluctuations
or fluctuations related to our financial results or other developments, may adversely affect your ability to sell your shares
at a price equal to or above the price at which you purchased them. Decreases in the price of our common stock may also lead to
de-listing of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27.5pt"><B>Management will have broad discretion
as to the use of the proceeds from this offering, and we may not use the proceeds effectively. </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27.5pt">Our management will have broad discretion
in the application of the net proceeds from this offering and could spend the proceeds in ways that you do not agree with or that
do not improve our results of operations or enhance the value of our common stock (see &ldquo;Use of Proceeds&rdquo;). Our failure
to apply these funds effectively could have a material adverse effect on our business and cause the price of our common stock
to decline.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27.5pt"><B>You will experience immediate and substantial
dilution in the net tangible book value per share of the common stock you purchase. </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27.5pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27.5pt">Since the price per share of our common
stock being offered is higher than the net tangible book value per share of our common stock, you will suffer substantial dilution
in the net tangible book value of the common stock you purchase in this offering. Based on the public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, and after deducting the underwriting discount and estimated offering expenses payable by us, if you purchase shares of
common stock in this offering, you will suffer immediate and substantial dilution of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share in the net tangible book value of the common stock. See the section entitled &ldquo;Dilution&rdquo; in this prospectus for
a more detailed discussion of the dilution you will incur if you purchase common stock in this offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27.5pt"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27.5pt"><B>Our outstanding options and the availability
for resale of the underlying shares may adversely affect the trading price of our common stock. </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27.5pt"> As of January 7, 2015, there were outstanding
stock options to purchase approximately 235,478 shares of our common stock at a weighted-average exercise price of $5.95 per share.
Our outstanding options could adversely affect our ability to obtain future financing or engage in certain mergers or other transactions,
since the holders of options can be expected to exercise them at a time when we may be able to obtain additional capital through
a new offering of securities on terms more favorable to us than the terms of outstanding options. For the life of the options,
the holders have the opportunity to profit from a rise in the market price of our common stock without assuming the risk of ownership.
The issuance of shares upon the exercise of outstanding options will also dilute the ownership interests of our existing stockholders. </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>The rights of the holders of common
stock may be impaired by the potential issuance of preferred stock.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our board of directors has the right, without
stockholder approval, to issue preferred stock with voting, dividend, conversion, liquidation or other rights which could adversely
affect the voting power and equity interest of the holders of common stock, which could be issued with the right to more than
one vote per share, and could be utilized as a method of discouraging, delaying or preventing a change of control. The possible
negative impact on takeover attempts could adversely affect the price of our common stock. Although we have no present intention
to issue any shares of preferred stock or to create any new series of preferred stock, we may issue such shares in the future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Risks Related to Our Business and Industry</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27.5pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>We have incurred principally losses
since inception and losses may continue, which could result in a decline in the value of our securities and a loss of your investment.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We sustained net losses of $2,424,256 and
$2,260,086 for the fiscal years ended December 31, 2013 and 2012, respectively, and our accumulated deficit was $85,655,564 as
of December 31, 2013. Our net losses for the nine months ended September 30, 2014 were $1,683,008 and our accumulated deficit
was $87,338,572 as of September 30, 2014. Since we expect to incur additional expenditures in line with the sales growth of our
business, we may not achieve operating profits in the near future. This could lead to a decline in the value of our securities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Our proprietary software relies on reference
data provided by government and quasi-government agencies. If these governmental and quasi-government agencies were to stop sharing
data with us, the utility of our proprietary software would be diminished in those jurisdictions and our business would be damaged.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Currently, the fifty states, ten Canadian
provinces and the District of Columbia, which in most instances conform to the guidelines established by certain organizations
responsible for implementing industry standards, cooperate with us by providing sample identification cards so that we may modify
all of our hardware and software products to read and analyze the encoded information found on such jurisdiction&rsquo;s identification
cards. In the event that one or more of these jurisdictions do not continue to provide this reference data, the utility of our
proprietary software may be diminished in those jurisdictions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Our business strategy exposes us to
long sales and implementation cycles for our products.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our target customers in the commercial
fraud protection, access control and age verification industry sectors include large retailers and government agencies, which
typically require longer sales and implementation cycles for our products than do our potential customer base solely interested
in age verification, such as restaurant, bar and convenience store operators. The longer sales and implementation cycles for larger
retail companies continue to have an adverse impact on the timing of realizing our revenues. In addition, budgetary constraints
and potential economic slowdowns may also continue to delay purchasing decisions by these prospective customers. These initiatives
have costs associated with them, and we cannot assure you that they ultimately will prove successful or result in, an increase
to our revenues or profitability.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;In addition, the loss or significant
reduction in government spending by government entities could materially limit our ability to obtain government contracts. These
limitations, if significant, could also have a material adverse effect on our business, financial condition and results of operations.
In addition, we will need to develop additional strategic relationships with large government contractors in order to successfully
compete for government contracts. Should we lose or fail to develop these strategic relationships we may not be able to implement
our business strategy.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>The industry for our systems and software
is evolving and its growth is uncertain.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Demand and industry acceptance for recently
introduced and existing systems, and software and sales from such systems and software, are subject to a high level of uncertainty
and risk. With changing administration in government, changes in government budgets, and slowly evolving government standards
on use of identity products, the government sector is slowly developing. The commercial sector has the ability to develop faster
than the government sector, but it is also subject to a higher level of uncertainty because of potential uncertainty in the continued
financial health of our commercial customers, as well as long sales cycles. Our business may suffer if the industry develops more
slowly than anticipated and does not sustain industry acceptance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Failure to manage our operations if
they expand could impair our future growth.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If we are able to expand our operations,
particularly through multiple sales to large retailers and government agencies in the document verification industry, the expansion
will place significant strain on our management, financial controls, operating systems, personnel and other resources. Our ability
to manage future growth, should it occur, will depend to a large extent upon several factors, including our ability to do the
following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>build and train
                                         our sales force;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>establish and
                                         maintain relationships with distributors;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>develop customer
                                         support systems;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>develop expanded
                                         internal management and financial controls adequate to keep pace with growth in personnel
                                         and sales, if they occur; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>manage the
                                         use of third-party manufacturers and suppliers.&nbsp;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If we are able to grow our business but
do not manage our growth successfully, we may experience increased operating expenses, loss of customers, distributors or suppliers
and declining or slowed growth of revenues.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>We are subject to risks associated with
product failure and technological flaws.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Products as complex as those offered by
us may contain undetected errors or result in failures when first introduced or when new versions are released. Despite vigorous
product testing efforts and testing by current and potential customers, it is possible that errors will be found in a new product
or enhancement after commencement of commercial shipments. The occurrence of product defects or errors could result in adverse
publicity, delay in product introduction, diversion of resources to remedy defects, loss of, or a delay in industry acceptance,
claims by customers against us, or could cause us to incur additional costs, any of which could adversely affect our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Failure to protect our proprietary technology
may impair our competitive position.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We continue to allocate significant resources
to developing new and innovative technologies that are utilized in our products and systems. Because our continued success depends
on, to a significant degree, our ability to offer products providing superior functionality and performance over those offered
by our competitors, we consider the protection of our technology from unauthorized use to be fundamental to our success. This
is done by processes aimed at identifying and seeking appropriate protection for newly-developed intellectual property, including
patents, trade secrets, copyrights and trademarks, as well as policies aimed at identifying unauthorized use of such property.
These processes include:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>contractual
                                         arrangements providing for nondisclosure of proprietary information;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>maintaining
                                         and enforcing issued patents and filing patent applications on innovative solutions to
                                         commercially important problems;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>protecting
                                         trade secrets;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>protecting
                                         copyrights and trademarks by registration and other appropriate means;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>establishing
                                         internal processes for identifying and appropriately protecting new and innovative technologies;
                                         and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>establishing
                                         practices for identifying unauthorized use of intellectual property.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We may have to litigate to enforce patents
or trademarks or to determine the scope and validity of other parties&rsquo; proprietary rights. Litigation could be very costly
and divert management&rsquo;s attention. An adverse outcome in any litigation may have a severe negative effect on our financial
results. To determine the priority of inventions, we may have to participate in interference proceedings declared by the U.S.
Patent and Trademark Office or oppositions in foreign patent and trademark offices, which could result in substantial cost and
limitations on the scope or validity of our patents or trademarks.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Additionally, third parties,
including our competitors or licensees, may seek to have our patents reviewed by the Patent Trial and Appeal Board of the
United States Patent and Trademark Office in a post grant proceeding, such as post grant review or an inter partes review.
Such proceedings, if instituted could cancel our patents or narrow our the scope of our patent claims. We cannot predict the
effect that such proceedings, if instituted, may have on our business or revenue received from licensing our patents.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition, foreign laws treat the protection
of proprietary rights differently from laws in the United States. The failure of foreign laws or judicial systems to adequately
protect our proprietary rights or intellectual property, including intellectual property developed on our behalf by foreign contractors
or subcontractors may have a material adverse effect on our business, operations and financial results.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>If our future products incorporate technologies
that infringe the proprietary rights of third parties, and we do not secure licenses from them, we could be liable for substantial
damages.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are not aware that our current products
infringe the intellectual property rights of any third parties. We also are not aware of any third party intellectual property
rights that may hamper our ability to provide future products and services. However, we recognize that the development of our
services or products may require that we acquire intellectual property licenses from third parties so as to avoid infringement
of those parties&rsquo; intellectual property rights. These licenses may not be available at all or may only be available on terms
that are not commercially reasonable. If third parties make infringement claims against us whether or not they are upheld, such
claims could:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>consume substantial
                                         time and financial resources;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>divert the
                                         attention of management from growing our business and managing operations; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>disrupt product
                                         sales and shipments.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0pt"></TD><TD STYLE="width: 0pt"></TD><TD>If any third party prevails in an action against us for infringement
                                         of its proprietary rights, we could be required to pay damages and either enter into
                                         costly licensing arrangements or redesign our products so as to exclude any infringing
                                         use. As a result, we would incur substantial costs, delays in product development, sales
                                         and shipments, and our revenues may decline substantially. Additionally, we may not be
                                         able to achieve the minimum necessary growth for our continued success.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Failure to attract and retain management
and other personnel may damage our operations and financial results and cause our stock price to decline.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We depend to a significant degree on the
skills, experience and efforts of our executive officers and other key management, technical, finance, sales and other personnel.
Our failure to attract, integrate, motivate and retain existing or additional personnel could disrupt or otherwise harm our operations
and financial results. We do not carry key man life insurance policies covering any employees. The loss of services of certain
of our key employees, an inability to attract or retain qualified personnel in the future, or delays in hiring additional personnel
could delay the development of our business and could cause our stock price to decline.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>We incur significant accounting and
other control costs that impact our financial condition.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As a publicly traded corporation, we incur
certain costs to comply with regulatory requirements. If regulatory requirements were to become more stringent or if controls
thought to be effective later fail, we may be forced to make additional expenditures, the amounts of which could be material.
Some of our competitors are privately owned, so their accounting and control costs could create a competitive advantage over us.
Should our sales decline or if we are unsuccessful at increasing prices to cover higher expenditures for internal controls and
audits, our costs associated with regulatory compliance will rise as a percentage of sales.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>We</B> <B>have historically derived
a significant portion of our revenue from government R&amp;D (Research and Development) contracts, which are often non-standard,
involve competitive bidding, may be subject to cancellation and may produce volatility in earnings and revenue.</B>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"> In the nine months ended September 30,
2014 and in the years ended December 31, 2013 and 2012,&nbsp;we derived approximately 4%, 5% and 14.3% of our revenue, respectively,
from government R&amp;D contracts. These government contracts often include provisions that substantially differ from those found
in typical private commercial transactions. For instance, government contracts may: </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>include provisions
                                         that allow the agency, in certain circumstances, to terminate the contract without penalty;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>be subject
                                         to purchasing decisions by agencies that are subject to political influence;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>include bonding
                                         requirements;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>contain comprehensive
                                         procurement provisions that require us to expend substantial resources in pursuing the
                                         contract;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>specify performance
                                         criteria that we must satisfy before the customer accepts the products and services;
                                         and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>be subject
                                         to cancellation or reduction if funding is reduced or becomes unavailable.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Securing government contracts
typically involves a lengthy competitive bidding process. Often, unsuccessful bidders have the ability to challenge contract
awards. Such challenges may increase costs, result in delays and risk the loss of the contract by the winning bidder.
Protests or other delays related to material government contracts that may be awarded to us could result in revenue
volatility. State and local government agency contracts may depend on the availability of matching funds from federal, state
or local entities. State and local government agencies are subject to political, budgetary, purchasing and delivery
constraints that may result in irregular revenue and operating results. Revenue volatility makes management of our business
difficult. Outright loss of any material government contract through the protest process or otherwise, could significantly
reduce our revenues. Although our only revenue in 2013 related to such R&amp;D was for the close-out of prior year contracts,
we anticipate that we may have revenue from such contracts in the future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>We could be adversely affected by a
negative audit by the U.S.&nbsp;government.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We, like other government contractors,
are subject to various routine audits, reviews and investigations by U.S.&nbsp;government agencies, including the Defense Contract
Audit Agency and various agency inspectors. These agencies review a contractor&rsquo;s performance under its contracts, cost structure
and compliance with applicable laws, regulations, and standards. Any costs found to be misclassified may be subject to repayment.
If an audit or investigation uncovers improper or illegal activities, we may be subject to civil or criminal penalties and administrative
sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines, and suspension or prohibition
from doing business with the U.S.&nbsp;government.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Our business strategy exposes us to
long sales and implementation cycles for our products.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Historically, some of our primary target
customers have been government agencies and branches of the U.S. military, both of which require long sales and implementation
cycles for products, which may result in a long period of time prior to revenue realization. The loss or significant reduction
in government spending could limit our ability to obtain government contracts. These limitations, if significant, could significantly
reduce our revenues. We will need to develop additional strategic relationships with large government contractors in order to
successfully compete for government contracts. Should we lose or fail to develop these strategic relationships, we may not be
able to implement our business strategy.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>We cannot be certain that our backlog
estimates will result in actual revenues in any particular fiscal period because our clients may modify or terminate projects
or may decide not to exercise contract options.</B>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our backlog represents sales value of firm
orders for products and services not yet delivered and, for long-term, executed contractual arrangements (contracts, subcontract
and customer commitments), the estimated future sales value of product shipments, transactions processed and services to be provided
over the term of the contractual arrangements, including anticipated renewal options. For contracts with indefinite quantities,
our backlog is estimated based on current activity levels. Our backlog includes estimates of revenues, the receipt of which require
future government appropriations, depend on option exercise by clients or are subject to contract modification or termination.
At September 30, 2014, our backlog approximated $710,000, all of which is estimated to be realized in the next twelve months.
These estimates are based on our experience under such contracts and similar contracts, and we believe that such estimates are
reasonable. If we do not realize a substantial amount of our backlog, as we presently anticipate, our operations could be harmed
and future revenues could be significantly reduced.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Long lead times for the components used
in certain products creates uncertainty in our supply chain and may prevent us from making required deliveries to our customers
on time.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We rely exclusively on commercial off-the-shelf
technology in manufacturing our products. The lead-time for ordering certain components used in our products and for the production
of products can be lengthy. As a result, we must, from time to time, order products based on forecasted demand. If demand for
products lags significantly behind forecasts, we may purchase more product than we can sell. Conversely, if demand exceeds forecasts,
we may not have enough products to meet our obligations to our customers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>We obtain certain hardware and services,
as well as some software applications, from a limited group of suppliers, and our reliance on these suppliers involves significant
risks, including reduced control over quality and delivery schedules.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Any financial instability of our suppliers
could result in having to find new suppliers. We may experience significant delays in manufacturing and deliveries of products
and services to customers if we lose our sources or if supplies and services delivered from these sources are delayed. As a result,
we may be required to incur additional development, manufacturing and other costs to establish alternative supply sources. It
may take several months to locate alternative suppliers, if required. We cannot predict whether we will be able to obtain replacement
hardware within the required time frames at affordable costs, or at all. Any delays resulting from suppliers failing to deliver
hardware or delays in obtaining alternative hardware, in sufficient quantities and of sufficient quality, or any significant increase
in the cost of hardware from existing or alternative suppliers could result in delays on the shipment of product which, in turn,
could result in the loss of customers we may not be able to successfully complete.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Our Defense ID system relies on access
to databases run by various government agencies. If these governmental agencies were to stop sharing data with us, the utility
of the Defense ID system would be diminished and business would be damaged.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Currently, our Defense ID system accesses
over 100 separate databases run by various government and law enforcement agencies. We cannot be assured that each of these agencies
will continue to cooperate with us. In the event that one or more of these agencies does not continue to provide access to these
databases, the utility of the Defense ID system may be diminished and as a result, our sales could suffer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Our Defense ID system requires permission
from each branch of the U.S. military in the form of an Authority to Operate (ATO). If an existing ATO is revoked, we would risk
losing our ability to install our Defense ID system at military bases.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We cannot be assured that these permissions
will be renewed, and it is possible that they could be revoked. If one or more of these permissions is revoked or not renewed,
then the sector for the Defense ID system would be reduced and as a result, our sales could suffer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Our Defense ID system manages private
personal information and information related to sensitive government functions and a breach of the security systems protecting
such information may result in a loss of suppliers or customers or result in litigation.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The protective security measures designed
to protect sensitive information and contained in our products may not prevent all security breaches. Failure to prevent security
breaches may disrupt our business, damage our reputation and expose us to litigation and liability. A party who is able to circumvent
protective security measures used in these systems could misappropriate sensitive information or cause interruptions or otherwise
damage our products, services and reputation as well as the property and privacy of customers. If unintended parties obtain sensitive
data and information, or create bugs or viruses or otherwise sabotage the functionality of our products, we may receive negative
publicity, incur liability to our customers or lose the confidence of our customers, any of which may cause the termination or
modification of contracts. Further, our existing insurance coverage may be insufficient to cover losses and liabilities that may
result from such events.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition, we may be required to expend
significant capital and other resources to protect against the threat of security breaches or to alleviate problems caused by
the occurrence of any such breaches. However, protective or remedial measures may not be available at a reasonable price or at
all, or may not be entirely effective if commenced.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Future government regulation restricting
the capture of information electronically stored on identification cards could adversely affect our business.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Defense ID system is designed to read,
verify and capture information from identification cards. Currently, some jurisdictions have restrictions on what can be done
with this information. Because issues of personal privacy continue to be a major topic of public policy debate, it is possible
that, in the future, these or other jurisdictions may introduce similar or additional restrictions on capturing this information.
Therefore, the implementation of unfavorable regulations or unfavorable interpretations of existing regulations by courts or regulatory
bodies could require us to incur significant compliance costs, cause the development of the affected industry sectors to become
impractical and reduce our revenues and potential revenues.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>We are subject to risks associated with
product failure and technological flaws.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our products are complex and may contain
undetected errors or result in failures when first introduced or when new versions are released. Despite vigorous product testing
efforts and testing by current and potential customers, it is possible that errors will be found in a new product or enhancement
after commercial shipments have commenced. The occurrence of product defects or errors could result in negative publicity, delays
in product introduction, the diversion of resources to remedy defects and loss of or delay in industry acceptance or claims by
customers against us and could cause us to incur additional costs, any one of which could adversely affect our business. Because
of the risk of undetected error, we may be compelled to accept liability provisions that vary from our preferred contracting model
in certain critical transactions. There is a risk that in certain contracts and circumstances we may not be successful in adequately
minimizing product and related liabilities or that the protections negotiated will not ultimately be deemed enforceable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We carry product liability insurance, but
existing coverage may not be adequate to cover potential claims. The failure of our products to perform as promised could result
in increased costs, lower margins, liquidated damage payment obligations and harm to our reputation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>We may not be able to keep up with rapid
technological change.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The sectors for all of our products are
characterized by rapid technological advancements. Significant technological change could render existing technology obsolete.
If we are unable to successfully respond to these developments, or do not respond in a cost-effective manner, our business, financial
condition and results of operations will be materially adversely affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>We cannot guarantee that projects currently
in research and development stage, including FANs and Littoral Sensor Grids, will result in operational systems or prototypes
or that such systems or prototypes, if produced, will be commercially marketable.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Projects in the research and development
stage have not yet been proven operational. While we anticipate that we will be able to produce operational systems or prototypes
based on our research and development, there is no guarantee that we will be able to do so. Furthermore, even if we are able to
produce operational systems or prototypes, there is no guarantee that those systems or prototypes will prove commercially marketable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Future capital requirements may require
incurring debt or dilution of existing stockholders.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Acquisition and development opportunities
and other contingencies may arise, which could require us to raise additional capital or incur debt. If we raise additional capital
through the sale of equity, including preferred stock, or convertible debt securities, the percentage ownership of our then existing
stockholders will be diluted.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Because we do not intend to pay dividends
on our common stock, stockholders will benefit from an investment in our stock only if it appreciates in value.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have never declared or paid any
cash dividends on our shares of common stock. We currently intend to retain all future earnings, if any, for use in the
operations and expansion of the business. As a result, we do not anticipate paying cash dividends in the foreseeable future.
Any future determination as to the declaration and payment of cash dividends will be at the discretion of our Board of
Directors and will depend on factors the Board of Directors deems relevant, including among others, our results of
operations, financial condition and cash requirements, business prospects, and the terms of Intellicheck Mobilisa&rsquo;s
credit facilities and other financing arrangements. Accordingly, realization of a gain on stockholders&rsquo; investments
will depend on the appreciation of the price of our stock. There is no guarantee that our stock will appreciate in value.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27.5pt"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><A NAME="s1_4"></A><B>CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">This prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange
Act. Such forward-looking statements include those that express plans, anticipation, intent, contingency, goals, targets or future
development and/or otherwise are not statements of historical fact. These forward-looking statements are based on our current
expectations and projections about future events and they are subject to risks and uncertainties known and unknown that could
cause actual results and developments to differ materially from those expressed or implied in such statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">In some cases, you can identify forward-looking
statements by terminology, such as &ldquo;expects,&rdquo; &ldquo;anticipates,&rdquo; &ldquo;intends,&rdquo; &ldquo;estimates,&rdquo;
&ldquo;plans,&rdquo; &ldquo;believes,&rdquo; &ldquo;seeks,&rdquo; &ldquo;may,&rdquo; &ldquo;should,&rdquo; &ldquo;could&rdquo;
or the negative of such terms or other similar expressions. Accordingly, these statements involve estimates, assumptions and uncertainties
that could cause actual results to differ materially from those expressed in them. Any forward-looking statements are qualified
in their entirety by reference to the factors discussed throughout this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">You should read this prospectus and the
documents that we have filed as exhibits to the registration statement, of which this prospectus
is part, completely and with the understanding that our actual future results may be materially different from what we expect.
You should assume that the information appearing in this prospectus is accurate as of the date on the front cover of this prospectus.
Because the risk factors referred to above could cause actual results or outcomes to differ materially from those expressed in
any forward-looking statements made by us or on our behalf, you should not place undue reliance on any forward-looking statements.
Further, any forward-looking statement speaks only as of the date on which it is made, and except as may be required under applicable
securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the
date on which the statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time,
and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on
our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from
those contained in any forward-looking statements. We qualify all of the information presented in this prospectus, and particularly
our forward-looking statements, by these cautionary statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><A NAME="s1_5"></A>USE OF PROCEEDS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">We estimate that our net proceeds from
the sale of the common stock offered pursuant to this prospectus, will be approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
or approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million if the underwriters exercise in full their
option to purchase&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional shares, based upon the public offering
price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share and after deducting the underwriting discount and the estimated offering expenses that are payable by us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">We currently intend to use the net proceeds
from this offering to further supplement our continued research and development initiatives in connection with expanding and improving
our product line, to further our sales and marketing groups, to implement further measures to protect our intellectual property
and for general corporate purposes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">We have not yet determined the amount
of net proceeds to be used specifically for any of the foregoing purposes. Accordingly, our management will have significant discretion
and flexibility in applying the net proceeds from this offering. Pending any use, as described above, we intend to invest the
net proceeds in high-quality, short-term, interest-bearing securities.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><A NAME="s1_6"></A>MARKET PRICE OF COMMON STOCK</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Our common stock is currently traded on
NYSE MKT LLC under the symbol &ldquo;IDN.&rdquo; The following table sets forth for the periods indicated the high and low sales
prices per share of our common stock as reported on the NYSE MKT LLC:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD> &nbsp; </TD><TD STYLE="font-weight: bold; padding-bottom: 1pt"> &nbsp; </TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"> High </TD><TD STYLE="padding-bottom: 1pt; font-weight: bold"> &nbsp; </TD><TD STYLE="font-weight: bold; padding-bottom: 1pt"> &nbsp; </TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"> Low </TD><TD STYLE="padding-bottom: 1pt; font-weight: bold"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left; text-indent: -0.1in; padding-left: 0.1in"> Fiscal Year 2013: </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> &nbsp; </TD><TD STYLE="text-align: right"> &nbsp; </TD><TD STYLE="text-align: left"> &nbsp; </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> &nbsp; </TD><TD STYLE="text-align: right"> &nbsp; </TD><TD STYLE="text-align: left"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 74%; text-align: left; text-indent: -0.1in; padding-left: 0.1in"> First Quarter </TD><TD STYLE="width: 1%"> &nbsp; </TD>
    <TD STYLE="width: 1%; text-align: left"> $ </TD><TD STYLE="width: 10%; text-align: right"> 7.52 </TD><TD STYLE="width: 1%; text-align: left"> &nbsp; </TD><TD STYLE="width: 1%"> &nbsp; </TD>
    <TD STYLE="width: 1%; text-align: left"> $ </TD><TD STYLE="width: 10%; text-align: right"> 3.12 </TD><TD STYLE="width: 1%; text-align: left"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in"> Second Quarter </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> $ </TD><TD STYLE="text-align: right"> 5.60 </TD><TD STYLE="text-align: left"> &nbsp; </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> $ </TD><TD STYLE="text-align: right"> 2.40 </TD><TD STYLE="text-align: left"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in"> Third Quarter </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> $ </TD><TD STYLE="text-align: right"> 6.56 </TD><TD STYLE="text-align: left"> &nbsp; </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> $ </TD><TD STYLE="text-align: right"> 2.24 </TD><TD STYLE="text-align: left"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in"> Fourth Quarter </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> $ </TD><TD STYLE="text-align: right"> 6.08 </TD><TD STYLE="text-align: left"> &nbsp; </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> $ </TD><TD STYLE="text-align: right"> 3.60 </TD><TD STYLE="text-align: left"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; text-indent: -0.1in; padding-left: 0.1in"> Fiscal Year 2014: </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> &nbsp; </TD><TD STYLE="text-align: right"> &nbsp; </TD><TD STYLE="text-align: left"> &nbsp; </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> &nbsp; </TD><TD STYLE="text-align: right"> &nbsp; </TD><TD STYLE="text-align: left"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in"> First Quarter </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> $ </TD><TD STYLE="text-align: right"> 13.04 </TD><TD STYLE="text-align: left"> &nbsp; </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> $ </TD><TD STYLE="text-align: right"> 3.44 </TD><TD STYLE="text-align: left"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in"> Second Quarter </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> $ </TD><TD STYLE="text-align: right"> 7.76 </TD><TD STYLE="text-align: left"> &nbsp; </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> $ </TD><TD STYLE="text-align: right"> 4.64 </TD><TD STYLE="text-align: left"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in"> Third Quarter </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> $ </TD><TD STYLE="text-align: right"> 6.00 </TD><TD STYLE="text-align: left"> &nbsp; </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> $ </TD><TD STYLE="text-align: right"> 3.86 </TD><TD STYLE="text-align: left"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in"> Fourth Quarter </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> $ </TD><TD STYLE="text-align: right"> 4.29 </TD><TD STYLE="text-align: left"> &nbsp; </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> $ </TD><TD STYLE="text-align: right"> 2.95 </TD><TD STYLE="text-align: left"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in"><B> Fiscal Year 2015: </B></TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> &nbsp; </TD><TD STYLE="text-align: right"> &nbsp; </TD><TD STYLE="text-align: left"> &nbsp; </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> &nbsp; </TD><TD STYLE="text-align: right"> &nbsp; </TD><TD STYLE="text-align: left"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in"> First Quarter* </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> $ </TD><TD STYLE="text-align: right"> 2.78 </TD><TD STYLE="text-align: left"> &nbsp; </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> $ </TD><TD STYLE="text-align: right"> 2.58 </TD><TD STYLE="text-align: left"> &nbsp; </TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">_____________________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> * Through January 7, 2015 </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"> On January 7,
2015, the last reported sale price of our common stock on the NYSE MKT LLC was $2.66 per share. As of January 7, 2015, we had
54 holders of record of our common stock. The actual number of stockholders is greater than this number of record holders and
includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees. This number
of holders of record also does not include stockholders whose shares may be held in trust by other entities. </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &nbsp; </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><A NAME="s1_7"></A>DIVIDEND POLICY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">We have never declared or paid cash dividends
on our capital stock. We currently intend to retain our future earnings, if any, for use in our business and therefore do not
anticipate paying cash dividends in the foreseeable future. In addition, unless waived, the terms of our loan and security agreement
with Silicon Valley Bank limit our ability to pay cash dividends. Payment of future dividends, if any, will be at the discretion
of our board of directors after taking into account various factors, including our financial condition, operating results, current
and anticipated cash needs and plans for expansion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="s1_8"></A><B>CAPITALIZATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The following table
sets forth our cash and cash equivalents and capitalization as of September 30, 2014 as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">on an actual basis; and</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Symbol"> &middot; </FONT></TD><TD STYLE="text-align: left"> on
                                         a pro forma basis, giving effect to the sale and issuance by us of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
                                         shares of common stock in this offering, at the public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
                                         share after deducting estimated underwriting discounts and commissions and estimated
                                         offering expenses payable by us. </TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>As&nbsp;of&nbsp;September&nbsp;30,</B></FONT><BR>
    <FONT STYLE="font-size: 10pt"><B>2014</B></FONT></TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Actual</B></FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Pro</B></FONT><BR>
    <FONT STYLE="font-size: 10pt"><B>Forma</B></FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD COLSPAN="7" STYLE="text-align: center"><FONT STYLE="font-size: 10pt">(in&nbsp;thousands,&nbsp;unaudited)</FONT></TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: top">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: top">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255)">
    <TD STYLE="vertical-align: top; width: 78%; padding-bottom: 3pt; padding-left: 0.1in; text-indent: -0.1in"><FONT STYLE="font-size: 10pt">Cash
    and cash equivalents</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; padding-bottom: 3pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 8%; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">3,067</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; width: 1%; padding-bottom: 3pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; padding-bottom: 3pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 8%; border-bottom: black 2.25pt double; text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: bottom; width: 1%; padding-bottom: 3pt">&nbsp;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 0.1in; text-indent: -0.1in"><FONT STYLE="font-size: 10pt">Working capital</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2,942</FONT></TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255)">
    <TD STYLE="vertical-align: top; padding-left: 0.1in; text-indent: -0.1in"><FONT STYLE="font-size: 10pt">Stockholders&rsquo;
    (deficit) equity:</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 0.2in; text-indent: -0.1in"><FONT STYLE="font-size: 10pt">Common stock, $0.01 par value; 40,000
    shares authorized;&nbsp;4,932 shares issued and outstanding actual,&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;number
    of shares issued and outstanding pro forma</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">5</FONT></TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255)">
    <TD STYLE="vertical-align: top; padding-left: 0.2in; text-indent: -0.1in"><FONT STYLE="font-size: 10pt">Additional paid-in
    capital</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt"></FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">106,265</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top; padding-left: 0.2in; text-indent: -0.1in">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255)">
    <TD STYLE="vertical-align: top; padding-bottom: 1pt; padding-left: 0.2in; text-indent: -0.1in"><FONT STYLE="font-size: 10pt">Accumulated
    deficit</FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid"></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(87,339</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-bottom: 1pt">)</TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top; padding-bottom: 1pt; padding-left: 0.1in; text-indent: -0.1in"><FONT STYLE="font-size: 10pt">Total
    stockholders&rsquo; equity</FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid"></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">18,931</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255)">
    <TD STYLE="vertical-align: top; padding-bottom: 3pt; padding-left: 0.1in; text-indent: -0.1in"><FONT STYLE="font-size: 10pt">Total
    capitalization</FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 3pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right">18,931</TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-bottom: 3pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 3pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-bottom: 3pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">You should read the preceding table together
with &ldquo;Selected Consolidated Financial Data,&rdquo; &ldquo;Management&rsquo;s Discussion and Analysis of Financial Condition
and Results of Operations,&rdquo; &ldquo;Description of Capital Stock,&rdquo; and the financial statements and related notes appearing
elsewhere in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"> The number of
shares of our common stock to be outstanding following this offering is based on 4,934,601 shares of our common stock outstanding
as of January 7, 2015, and: </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>assumes no
                                         exercise by the underwriters of their option to purchase up to an additional&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
                                         of common stock to cover over-allotments, if any;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>excludes 235,478
                                         shares of our common stock issuable upon exercise of outstanding stock options under
                                         our equity incentive plans at a weighted average exercise price of $5.95 per share, with
                                         76,291 shares remaining available for future grant under such plans; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>excludes 48,625
                                         shares of our common stock issuable upon exercise of warrants with an exercise price
                                         of $4.48 per share, and 16,356 shares of our common stock issuable upon exercise of warrants
                                         with an exercise price of $8.00 per share.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><A NAME="s1_9"></A>DILUTION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">If you invest in our common stock in this
offering, your ownership interest will be diluted to the extent of the difference between the public offering price per share
of our common stock and the net tangible book value per share of our common stock immediately after this offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"> The net tangible book value per share
is determined by dividing our total tangible assets less our total liabilities by the number of shares of common stock outstanding.
Our historical net tangible book value (deficit) as of September 30, 2014 was $2.65 million, or $0.54 per share. After giving
effect to the sale of shares of common stock by us at the public offering price of $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share
less the estimated offering expenses payable by us and underwriters&rsquo; discounts, our pro forma net tangible book value at
September 30, 2014 would have been approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, or $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
per share. This would represent an immediate increase in the net tangible book value of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to existing stockholders and an immediate dilution of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share
to investors in this offering. The following table illustrates this per share dilution: </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; padding-left: 0.1in; text-indent: -0.1in"><FONT STYLE="font-size: 10pt"> Assumed public
    offering price per share </FONT></TD>
    <TD STYLE="vertical-align: bottom"> &nbsp; </TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom"> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </TD>
    <TD STYLE="vertical-align: bottom"> &nbsp; </TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt"> $ </FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top; padding-left: 0.2in; text-indent: -0.1in"><FONT STYLE="font-size: 10pt"> Historical net
    tangible book value per share as of September 30, 2014 </FONT></TD>
    <TD STYLE="vertical-align: bottom"> &nbsp; </TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt"> $ </FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"> 0.54<FONT STYLE="font-size: 10pt">&nbsp;</FONT> </TD>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </TD>
    <TD STYLE="vertical-align: bottom"> &nbsp; </TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom"> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; padding-left: 0.2in; text-indent: -0.1in"><FONT STYLE="font-size: 10pt"> Increase in historical
    net tangible book value per share attributable to investors in this offering </FONT></TD>
    <TD STYLE="vertical-align: bottom"> &nbsp; </TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt"> $ </FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </TD>
    <TD STYLE="vertical-align: bottom"> &nbsp; </TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom"> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top; width: 78%; padding-left: 0.1in; text-indent: -0.1in"><FONT STYLE="font-size: 10pt"> Pro
    forma net tangible book value per share after giving effect to this offering </FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%"> &nbsp; </TD>
    <TD STYLE="vertical-align: bottom; width: 1%"> &nbsp; </TD>
    <TD STYLE="vertical-align: bottom; width: 8%; text-align: right"> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: bottom; width: 1%"> &nbsp; </TD>
    <TD STYLE="vertical-align: bottom; width: 1%"> &nbsp; </TD>
    <TD STYLE="vertical-align: bottom; width: 1%"><FONT STYLE="font-size: 10pt"> $ </FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 8%; text-align: right"> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: bottom; width: 1%"> &nbsp; </TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; padding-left: 0.1in; text-indent: -0.1in"><FONT STYLE="font-size: 10pt"> Dilution per share
    to investors in this offering </FONT></TD>
    <TD STYLE="vertical-align: bottom"> &nbsp; </TD>
    <TD STYLE="vertical-align: bottom"> &nbsp; </TD>
    <TD STYLE="vertical-align: bottom; text-align: right"> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </TD>
    <TD STYLE="vertical-align: bottom"> &nbsp; </TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt"> $ </FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt"> &nbsp; </FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The above discussion
and table is based on 4,932,057 shares of our common stock outstanding as of September 30, 2014, and:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>assumes no
                                         exercise by the underwriters of their option to purchase up to an additional&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
                                         of common stock to cover over-allotments, if any;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>excludes 235,478
                                         shares of our common stock issuable upon exercise of outstanding stock options under
                                         our equity incentive plans at a weighted average exercise price of $5.95 per share, with
                                         76,291 shares remaining available for future grant under such plans; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>excludes 48,625
                                         shares of our common stock issuable upon exercise of warrants with an exercise price
                                         of $4.48 per share, and 16,356 shares of our common stock issuable upon exercise of warrants
                                         with an exercise price of $8.00 per share.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">If the underwriters exercise their option
to purchase additional shares in full, pro forma net tangible book value as of September 30,
2014 will increase to $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million, or $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, representing an increase to existing stockholders of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share,
and there will be an immediate dilution of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share
to new investors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">To the extent that outstanding options
and warrants are exercised, you will experience further dilution. In addition, we may choose to raise additional capital due to
market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating
plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance
of these securities may result in further dilution to our stockholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><A NAME="s1_10"></A>SELECTED FINANCIAL DATA</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><I>You should read the following selected
historical consolidated financial data below together with &ldquo;Capitalization,&rdquo; &ldquo;Management&rsquo;s Discussion
and Analysis of Financial Condition and Results of Operations&rdquo; and the financial statements, related notes and other financial
information included elsewhere in this prospectus. The selected financial data in this section are not intended to replace the
financial statements and are qualified in their entirety by the financial statements and related notes included elsewhere in this
prospectus.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">The following selected statements of operations
data for the years ended December 31, 2013 and 2012 and the balance sheet data as of December 31, 2013 and 2012 are derived from
our audited financial statements appearing elsewhere in this prospectus. The selected statements of operations data for the nine
months ended September 30, 2014 and 2013 and the balance sheet data as of September 30, 2014 and 2013 have been derived from our unaudited financial statements included elsewhere in this prospectus. In the opinion of management, the unaudited
interim financial statements have been prepared on the same basis as the December 31, 2013 audited consolidated financial statements
and include all adjustments, consisting only of normal recurring adjustments, necessary to fairly state the information set forth
herein. The financial statements have been prepared in accordance with the regulations of the Securities and Exchange Commission
(&ldquo;SEC&rdquo;), but omit certain information and footnote disclosures necessary to present the financial statements in accordance
with generally accepted accounting principles (&ldquo;GAAP&rdquo;). These interim financial statements should be read in conjunction
with the audited consolidated financial statements and footnotes included elsewhere in this prospectus.&nbsp; The results of operations
for the nine months ended September 30, 2014 are not necessarily indicative of results to be expected for the entire year.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">You should read this data together with
our audited financial statements and related notes appearing elsewhere in this prospectus and the information under the captions
&ldquo;Management&rsquo;s Discussion and Analysis of Financial Condition and Results of Operations.&rdquo; Our historical results
are not necessarily indicative of our future results, and our operating results for the nine-month period ended September 30,
2014 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2014 or any other
interim periods or any future year or period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Years&nbsp;Ended&nbsp;December&nbsp;31,</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Nine Months<BR>
 Ended<BR> September 30,</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2014</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; padding-bottom: 1pt">(unaudited)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="14" STYLE="text-align: center"><FONT STYLE="font-size: 10pt">(In&nbsp;thousands,&nbsp;except&nbsp;per&nbsp;share&nbsp;data) <SUP>(1)</SUP></FONT></TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left">Selected Operations Data:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 48%">Revenue</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">8,803</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">7,298</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">5,932</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">5,507</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Loss from operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,261</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,424</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,824</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,684</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Net loss</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,260</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,424</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,824</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,683</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>Net loss per common share</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9.75pt">Basic</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(0.65</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(0.70</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(0.53</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(0.35</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 9.75pt">Diluted</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(0.65</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(0.70</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(0.53</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(0.35</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Common shares used in computing per share amounts</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 9.75pt">Basic</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,465</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,487</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,471</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,757</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9.75pt">Diluted</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,465</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,487</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,471</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,757</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">As&nbsp;of&nbsp;December&nbsp;31,</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">As at September 30,</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2014</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; padding-bottom: 1pt">(unaudited)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="14" STYLE="text-align: center">(In&nbsp;thousands)</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left">Selected balance sheet data:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 48%; text-align: left">Cash and cash equivalents</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">1,686</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">224</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">643</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">3,067</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Working capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">744</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(720</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(395</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,942</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Total assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,461</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">17,902</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">19,114</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">22,597</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Total liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,782</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,546</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,161</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,667</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Stockholders&rsquo; equity</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">17,679</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">15,356</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">15,953</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">18,931</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>Share data reflects the one for eight reverse split effected August 12, 2014.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="s1_11"></A><B>MANAGEMENT&rsquo;S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>The following discussion and analysis of our financial condition
and results of operations constitutes management&rsquo;s review of the factors that affected our financial and operating performance
for the nine month periods ended September 30, 2014 and 2013 and for the fiscal years ending December 31, 2013 and December 31,
2012, and should be read together with our &ldquo;Selected Financial Data&rdquo; and our financial statements, related notes,
and other financial information included elsewhere in this prospectus. This discussion contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ materially from those described in, or implied by, the forward-looking
statements. Factors that could cause or contribute to those differences include, but are not limited to, those identified below
and those discussed above in the section entitled &ldquo;Risk Factors&rdquo; included elsewhere in this prospectus.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Overview</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are a leading technology company engaged
in developing and marketing wireless technology and identity systems for various applications including mobile and handheld access
control and security systems for the government, military and commercial markets. Products include the Defense ID and Fugitive
Finder systems, advanced ID card access control products currently protecting military and federal locations, and ID-Check, a
patented technology that instantly reads, analyzes, and verifies encoded data in magnetic stripes and barcodes on government-issue
IDs from U.S. and Canadian jurisdictions designed to improve the Customer Experience for the financial, hospitality and retail
sectors. Wireless products include enterprise wireless system installation in rural areas of the country.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Critical Accounting Policies and the Use of Estimates</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The preparation of the Company&rsquo;s
financial statements in conformity with accounting principles generally accepted in the United States of America requires management
to make estimates and assumptions that affect the amounts reported in the Company&rsquo;s financial statements and accompanying
notes. Significant estimates and assumptions that affect amounts reported in the financial statements include impairment of goodwill,
valuation of intangible assets, deferred tax valuation allowances, allowance for doubtful accounts and the fair value of stock
options granted under the Company&rsquo;s stock-based compensation plans. Due to the inherent uncertainties involved in making
estimates, actual results reported in future periods may be different from those estimates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We believe that there are several accounting
policies that are critical to understanding our historical and future performance, as these policies affect the reported amounts
of revenue and the more significant areas involving management's judgments and estimates. These significant accounting policies
relate to revenue recognition, goodwill, stock-based compensation, deferred taxes and commitments and contingencies. These policies
and our procedures related to these policies are described in detail below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Goodwill</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The excess of the purchase consideration
over the fair value of the assets of acquired businesses is considered goodwill. Under authoritative guidance, purchased goodwill
is not amortized, but rather it is periodically reviewed for impairment. The Company had goodwill of $12,308,661 at September
30, 2014. This goodwill resulted from the acquisition of Mobilisa, Inc. and Positive Access Corporation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For the year ended December 31, 2013, the
Company performed its annual impairment test of goodwill and concluded that no impairment charge was required. Under authoritative
guidance, the Company can use industry and Company specific qualitative factors to determine whether it is more likely than not
that impairment exists, before using a two-step quantitative analysis. Events or changes in circumstances which could trigger
an impairment review include macroeconomic conditions, industry and market conditions, cost factors, overall financial performance,
other entity specific events and sustained decrease in share price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For the year ended December 31, 2013, after
a review of these qualitative factors, the Company determined that it was necessary to perform a two-step quantitative analysis.
The first step is to compare the fair value of the Company&rsquo;s reporting unit, including goodwill to its carrying value. If
the fair value of the reporting unit exceeds its carrying amount, goodwill is considered not impaired otherwise, there is an indication
that goodwill may be impaired and the amount of loss, if any is measured by performing step two. Under step two, the impairment
loss, if any, is measured by comparing the implied fair value of the reporting unit goodwill with the carrying amount of goodwill.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Company engaged an outside consulting
firm to perform this analysis. This firm appraised the fair value of the Company&rsquo;s reporting unit in excess of its carrying
value as of the reporting date, so no second step was necessary. The firm used the income approach, on a debt-free basis, to perform
its analysis, because of the uniqueness of the Company and unrepresentative nature of the Company&rsquo;s historical performance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Based on the outside consultant&rsquo;s
report and the Company&rsquo;s review of its market capitalization and movement in stock price, Management determined that no
impairment of goodwill existed as of December 31, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Company determined that no events occurred
or circumstances changed during the nine months ended September 30, 2014 that would more likely than not reduce the fair value
of the Company below its carrying amounts. The Company will, however, continue to monitor its stock price and operations for any
potential indicators of impairment. The Company will conduct its 2014 annual test for goodwill impairment in the fourth quarter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Intangible Assets</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Acquired intangible assets include trade
names, patents, developed technology and backlog described more fully the notes to our financial statements. We use the straight
line method to amortize these assets over their estimated useful lives and we review our long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of these assets may not be fully recoverable in accordance
with ASC Topic 360. To determine recoverability of our long-lived assets, the Company evaluates the probability that future undiscounted
net cash flows, without interest charges, will be less than the carrying amount of the assets. Impairment is measured at fair
value. No impairments were recognized during the years ended December 31, 2013 and 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Revenue Recognition and Deferred Revenue</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Revenue is generally recognized when persuasive
evidence of an arrangement exists, delivery has occurred, the fee is fixed and determinable, collectability is probable, and there
is no future Company involvement or commitment. The Company sells its commercial products directly through its sales force and
through distributors. Revenue from directsales of products is recognized when shipped to the customer and title has passed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Under the provisions of ASC Topic 605-25,
&ldquo;Revenue Arrangements with Multiple Deliverables,&rdquo; for multi-element arrangements that include tangible products containing
software essential to the tangible product&rsquo;s functionality and undelivered software elements relating to the tangible product&rsquo;s
essential software, the Company allocates revenue to all deliverables based on their relative selling prices. In such circumstances,
the Company uses a hierarchy to determine the selling price to be used for allocating revenue to deliverables: (i) vendor-specific
objective evidence of fair value (&ldquo;VSOE&rdquo;), (ii) third-party evidence of selling price and (iii) best estimate of the
selling price (&ldquo;ESP&rdquo;). VSOE generally exists only when the Company sells the deliverable separately and is the price
actually charged by the Company for that deliverable. ESPs reflect the Company&rsquo;s best estimates of what the selling prices
of elements would be if they were sold regularly on a stand-alone basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Company also recognizes revenues from
licensing of its patented software to customers. The licensed software requires continuing service or post contractual customer
support and performance; accordingly, a portion of the revenue is deferred based on its fair value and recognized ratably over
the period in which the future service, support and performance are provided, which is generally one to three years. Royalties
from the licensing of the Company&rsquo;s technology are recognized as revenues in the period they are earned.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Revenue from research and development contracts
are generally with government agencies under long-term cost-plus fixed-fee contracts, where revenue is based on time and material
costs incurred. Revenue from these arrangements is recognized as time is spent on the contract and materials are purchased. Research
and development costs are expensed as incurred.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Company also performs consulting work
for other companies. These services are billed based on time and materials. Revenue from these arrangements is also recognized
as time is spent on the contract and materials are purchased.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Subscriptions to database information can
be purchased for month-to-month, one, two, and three year periods. Revenue from subscriptions are deferred and recognized over
the contractual period, which is typically three years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Company offers enhanced extended warranties
for its sales of hardware and software at a set price. The revenue from these sales are deferred and recognized on a straight-line
basis over the contractual period, which is typically one to four years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Stock-Based Compensation</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Company accounts for the issuance of
equity awards to employees in accordance with ASC Topic 718 and 505, which requires that the cost resulting from all share based
payment transactions be recognized in the financial statements. This pronouncement establishes fair value as the measurement objective
in accounting for share based payment arrangements and requires all companies to apply a fair value based measurement method in
accounting for all share based payment transactions with employees.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Deferred Income Taxes</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases and net operating loss carry forwards. Deferred tax assets and
liabilities are measured using expected tax rates in effect for the year in which those temporary differences are expected to
be recovered or settled. We have recorded a full valuation allowance for our net deferred tax assets as of September 30, 2014,
due to the uncertainty of the our ability to realize those assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Commitments and Contingencies</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are not currently involved in any legal
proceedings that we believe would have a material adverse effect on our financial position, results of operations or cash flows.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The above listing is not intended to be
a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is
specifically dictated by generally accepted accounting principles, with no need for management's judgment in their application.
There are also areas in which management's judgment in selecting any available alternative would not produce a materially different
result.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Results of Operations </B>(All figures have been rounded
to the nearest $1,000)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Comparison of the three months ended September 30, 2014
to the three months ended September 30, 2013</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Revenues for quarter ended September 30,
2014 increased 25% to $3,218,000 compared to $2,579,000 for the previous year.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 70%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: justify">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Three months ended September 30,</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: justify">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2014</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">% Change</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 61%; text-align: justify">Identity Systems</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">2,477,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">1,641,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">51</TD><TD STYLE="width: 1%; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify; padding-bottom: 1pt">Wireless/R&amp;D</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">741,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">938,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(21</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: justify; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,218,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,579,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">25</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The increase in Identity Systems revenues
in the third quarter of 2014 is the result of increased license sales and higher subscriptions for Identity Systems. The decrease
in Wireless revenue in the third quarter of 2014 is attributable to the fact that there were less wireless installation projects
in progress in 2014. Total booked orders increased 100% to $3.08 million in the third quarter of 2014 compared to $1.54 million
in the third quarter of 2013. As of September 30, 2014, our backlog, which represents non-cancelable sales orders for products
not yet shipped and services to be performed, increased 73% to approximately $710,000 compared to $411,000 at September 30, 2013.
Our backlog at December 31, 2013, was approximately $381,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our gross profit as a percentage of revenues
was 62.6% for the three months ended September 30, 2014 compared to 69.1% for the three months ended September 30, 2013. The decrease
in the percentage is primarily due to a product mix.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Operating expenses, which consist of selling,
general and administrative and research and development expenses, decreased $78,000 or 4.4% to $1,688,000 for the three months
ended September 30, 2014 compared to $1,766,000 for the three months ended September 30, 2013. Selling expenses for the quarter
increased by $141,000 resulting primarily from an increase in sales compensation on increased sales and sales salaries. General
and administrative expenses decreased by $199,000 primarily due to a decrease in legal and professional fees. Research and development
expenses decreased by $20,000 due to a decrease in subscriptions and dues expense.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Interest income and expense was insignificant
in both periods presented.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">No provision for income tax has been made
for the three months ended September 30, 2014 due to the NOL carry forward.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As a result of the factors noted above,
the Company generated net income of $328,000 for the three months ended September 30, 2014 as compared to a net income of $16,000
for the three months ended September 30, 2013, or an increase of 1,950%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Comparison of the nine months ended September 30, 2014 to
the nine months ended September 30, 2013</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Revenues decreased by 7.16%, to $5,507,000
for the nine months ended September 30, 2014 from $5,932,000 for the nine months ended September 30, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 70%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: justify">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Nine months ended September 30,</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: justify">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2014</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">% Change</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 61%; text-align: justify">Identity Systems</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">4,576,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">4,326,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">6</TD><TD STYLE="width: 1%; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify; padding-bottom: 1pt">Wireless/R&amp;D</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">931,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,606,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(42</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: justify; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,507,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,932,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(7</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The increase in Identity Systems revenues
in 2014, was due to an increase in all segments of Defense ID, TWIC and Secure ID, was offset by a decrease in Wireless revenues
for a net decrease for the nine months ended September 30, 2014. Fewer Wireless projects were completed during the nine month
period ended September 30, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our gross profit as a percentage of revenues
was 63.5% for the nine months ended September 30, 2014 compared to 61.3% for the nine months ended September 30, 2013. The increase
in the percentage is primarily a result of less Wireless revenue which produce lower margins than Identity Systems.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Operating expenses, which consist of selling,
general and administrative and research and development expenses, decreased $282,000 or 5.2% to $5,177,000 for the nine months
ended September 30, 2014 from $5,460,000 for the nine months ended September 30, 2013. Selling expenses increased by $312,000
resulting primarily from an increase in sales salaries and related travel expenses. General and administrative expenses decreased
by $330,000 primarily due to a decrease in travel and legal fees and other professional fees. The research and development costs
decreased by $265,000 due to a decrease in salary and wage expense, overhead costs and dues and subscriptions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Interest income and expense was insignificant
in both periods presented.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">No provision for income tax has been made
for the nine months ended September 30, 2014, due to the NOL carry forward.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As a result of the factors noted above,
the Company generated net loss of $1,683,000 for the nine months ended September 30, 2014 as compared to a net loss of $1,824,000
for the nine months ended September 30, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Comparison of the year ended December 31, 2013 to the year
ended December 31, 2012</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Revenues for the year ended December 31,
2013 decreased 17% to $7,299,000 compared to $8,803,000 for the previous year.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 70%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: justify">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year ended December 31</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: justify">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">% Change</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 61%; text-align: justify">Identity Systems</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">5,665,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">7,544,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">(25</TD><TD STYLE="width: 1%; text-align: left">)%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify; padding-bottom: 1pt">Wireless/R&amp;D</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,634,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,259,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">30</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: justify; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">7,299,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">8,803,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(17</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The decrease in the Identity Systems revenues
in 2013 was a result of $1.0 million lower commercial identity sales, $422K lower Defense ID sales, and $335K less in subscription
and warranty revenue. The increase in Wireless revenues in 2013 was because the Company completed $1.3 million in wireless installations
in rural Washington state, offset by $933K less in wireless R&amp;D revenue caused by the end of this project with the Navy. Total
booked orders were $5.9 million in 2013 compared to $7.0 million in 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Gross profit decreased by $1,276,000 or
22% to $4,526,000 for the year ended December 31, 2013 from $5,801,000 in the year ended December 31, 2012. Our gross profit,
as a percentage of revenues, was 62% and 66% in 2013 and 2012, respectively. The decrease in gross profit was driven by low-margin
work installing wireless networks in rural areas on Washington State, which was not done in prior years. The lower margins on
this work was due to the high amount of equipment expense.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Operating expenses, which consist of selling,
general and administrative and research and development expenses decreased by $1,112,000 or 14% to $6,950,000 for the year ended
December 31, 2013 from $8,062,000 for the year ended December 31, 2012. Consolidated selling expenses decreased 32% to $1,096,000
for the year ended December 31, 2013 from $1,614,000 for the year ended December 31, 2012, principally as a result of a decrease
in total salaries and commissions paid for sales and sales support employees. The Company also spent less on trade shows in 2013.
General and administrative expenses decreased 10% to $3,797,000 for the year ended December 31, 2013 from $4,209,000 for the year
ended December 31, 2012, principally as a result of a decrease in total salaries paid and multiple directors of the board waiving
some of their fees. Research and development expenses decreased 8% to $2,057,000 for the year ended December 31, 2013 from $2,239,000
for the year ended December 31, 2012, principally as a result of lower fees paid for consulting, bonuses and professional dues.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Interest income and
expense was insignificant in both periods presented.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have incurred net losses to date; therefore,
we have paid nominal income taxes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As a result of the factors noted above,
we incurred a net loss of $2,424,000 for the year ended December 31, 2013 as compared to a net loss of $2,261,000 for the year
ended December 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Liquidity and Capital Resources </B>(All
figures have been rounded to the nearest $1,000)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of September 30,
2014, the Company had cash and cash equivalents of $3,067,000, working capital (defined as current assets minus current liabilities)
of $2,942,000, total assets of $22,597,000 and stockholders&rsquo; equity of $18,931,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">During the nine months ended September
30, 2014, the Company used net cash from operating activities of $2,309,000 compared to using net cash from operating activities
of $1,040,000 in the nine months ended September 30, 2013. Cash used by investing activities was $96,000 for the nine months ended
September 30, 2014 compared to $73,000 for the nine months ended September 30, 2013. Cash provided by financing activities was
$5,247,000 during the period ended September 30, 2014 compared to $70,000 in the same period last year.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"> As of September 30, 2014, the Company
had $0 in accrued expenses related to board fees for the first three quarters of 2014. On September 30, 2014, the CEO and a Senior
Vice President (collectively, the &ldquo;Executives&rdquo;), who were also board members, retired from the Company and simultaneously
resigned from the board of directors.&nbsp;In connection with the separation, the Company entered into a separation and consulting
agreement with each of the Executives. Included as part of the arrangement, the Company committed to payments totaling $587,500
to be made over a period of 15 months.&nbsp;In exchange for the consideration, the Executives agreed not to compete with the Company
or solicit any employee, contractor, or consultant of the Company to terminate employment or contractual relationship with the
Company, as well as refrain from other activities, as defined in the agreement. There is a renewal option contained in each agreement,
which must be mutually agreed to, for an additional nine-month period commencing on January 1, 2015 in exchange for aggregate
monthly payments of $27,500. At September 30, 2014, the Company has recorded the future payments of the agreement as a liability
and as a non-compete intangible asset totaling $587,500. The costs of the non-compete will be amortized over the term of the agreement
(15 months). There was no amortization expense recognized for the three or nine months ended September 30, 2014. The Company made
a lump sum payment of $87,500 on October 1, 2014 will make a payment of $60,000 on January 15, 2015, and is making 15 monthly
payments of $27,500 beginning on November 1, 2014 as a result of entering into the agreements with the Executives.&nbsp; </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Company entered into a revolving credit
facility with Silicon Valley Bank. On October 15, 2014, this facility was renewed for an additional year. The maximum borrowing
under the facility is $2 million. Borrowings under the facility are subject to certain limitations based on a percentage of accounts
receivable, as defined in the agreement, and are secured by all of the Company&rsquo;s assets. The facility bears interest at
a rate of U.S. prime (3.25% at September 30, 2014) plus 1.25% - 1.75%, depending on the Company&rsquo;s cash plus availability.
Interest is payable monthly and the principal is due upon maturity on October 15, 2015. At September 30, 2014, there were no amounts
outstanding and unused availability under the facility was approximately $658,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On January 14, 2014, the Company completed
a public offering of 1,118,375 shares of common stock at a price to the public of $3.60 per share. The number of shares the Company
sold includes the underwriters&rsquo; full exercise of their over-allotment option of 145,875 shares. Net proceeds to the Company
from the offering, before expenses, were approximately $3,644,000. The underwriter received a warrant to purchase 48,625 shares
of common stock, at the price of $4.48 (125% of the price of the shares sold in the offering), which will be exercisable one year
after the date of the offering and will expire on the fifth anniversary of that offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On April 10, 2014, the Company completed
a public offering of 327,125 shares of common stock at a price to the public of $6.40 per share. Net proceeds to the Company from
the offering, before expenses, were approximately $2,094,000. The underwriter received a warrant to purchase 16,356 shares of
common stock, at a price of $8.00 per share (125% of the price of the shares sold in the offering), which will be exercisable
one year after the date of the offering and will expire on the fifth anniversary of that offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We keep the option open to raise additional
funds to respond to business contingencies that may include the need to fund more rapid expansion, fund additional marketing expenditures,
develop new markets for our technology, enhance our operating infrastructure, respond to competitive pressures, or acquire complementary
businesses or necessary technologies. There can be no assurance that the Company will be able to secure the additional funds when
needed or obtain such on terms satisfactory to the Company, if at all.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are not currently involved in any legal
or regulatory proceeding, or arbitration, the outcome of which is expected to have a material adverse effect on our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Contractual Obligations and Commitments</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following summarizes
our contractual obligations as of September 30, 2014, and the effect such obligations are expected to have on our liquidity and
cash flows in future periods (in thousands).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD NOWRAP STYLE="text-align: left; padding-bottom: 1pt; vertical-align: bottom"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Contractual
    obligations:</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-bottom: 1pt; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Total</B></FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-bottom: 1pt; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-bottom: 1pt; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="vertical-align: bottom; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>Less
                                         than</B></FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>1
        Year</B></FONT></P></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-bottom: 1pt; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-bottom: 1pt; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>1-3
    Years</B></FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-bottom: 1pt; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-bottom: 1pt; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>3-5
    Years</B></FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-bottom: 1pt; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-bottom: 1pt; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="vertical-align: bottom; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>After</B></FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>5
        Years</B></FONT></P></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-bottom: 1pt; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; width: 40%; padding-left: 0.1in; text-indent: -0.1in"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Convertible
    promissory note payable</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; width: 1%"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; width: 1%"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; width: 1%"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; width: 1%"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; width: 1%"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top; padding-left: 0.1in; text-indent: -0.1in"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Interest
    due on convertible promissory note payable</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; padding-bottom: 1pt; padding-left: 0.1in; text-indent: -0.1in"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Non-cancelable
    operating lease obligations</FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 1pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">1,348,650</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-bottom: 1pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 1pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif">390,417</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-bottom: 1pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 1pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif">793,580</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-bottom: 1pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 1pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif">164,654</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-bottom: 1pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 1pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-bottom: 1pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top; padding-bottom: 3pt; padding-left: 0.1in; text-indent: -0.1in"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Total
    contractual cash obligations</FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 3pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">1,348,650</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-bottom: 3pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 3pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif">390,417</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-bottom: 3pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 3pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">793,580</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-bottom: 3pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 3pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif">164,654</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-bottom: 3pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 3pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-bottom: 3pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Net Operating Loss Carry Forwards</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As of September 30, 2014, the Company had
net operating loss carryforwards (&ldquo;NOL&rsquo;s&rdquo;) for federal and New York state income tax purposes of approximately
$41 million. There can be no assurance that the Company will realize any benefit of the NOL&rsquo;s. The federal and New York
state NOL&rsquo;s are available to offset future taxable income and expire from 2018 to 2030, if not utilized. The Company has
not yet completed its review to determine whether or not these NOL&rsquo;s will be limited under Section 382 of the Internal Revenue
Code due to the ownership change from the acquisition of Mobilisa, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Adjusted EBITDA</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Company uses Adjusted EBITDA as a non-GAAP
financial performance measurement. Adjusted EBITDA is calculated by adding back to net income (loss) interest, income taxes, impairments
of long-lived assets and goodwill, depreciation, amortization and stock-based compensation expense. Adjusted EBITDA is provided
to investors to supplement the results of operations reported in accordance with GAAP. Management believes that Adjusted EBITDA
provides an additional tool for investors to use in comparing Intellicheck Mobilisa financial results with other companies that
also use Adjusted EBITDA in their communications to investors. By excluding non-cash charges such as impairments of long-lived
assets and goodwill, amortization, depreciation and stock-based compensation, as well as non-operating charges for interest and
income taxes, investors can evaluate the Company's operations and can compare its results on a more consistent basis to the results
of other companies. In addition, Adjusted EBITDA is one of the primary measures management uses to monitor and evaluate financial
and operating results.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Intellicheck Mobilisa considers Adjusted
EBITDA to be an important indicator of the Company's operational strength and performance of its business and a useful measure
of the Company's historical operating trends. However, there are significant limitations to the use of Adjusted EBITDA since it
excludes interest income and expense, impairments of long lived assets and goodwill, stock based compensation expense, all of
which impact the Company's profitability, as well as depreciation and amortization related to the use of long term assets which
benefit multiple periods. The Company believes that these limitations are compensated by providing Adjusted EBITDA only with GAAP
net loss and clearly identifying the difference between the two measures. Consequently, Adjusted EBITDA should not be considered
in isolation or as a substitute for net loss presented in accordance with GAAP. Adjusted EBITDA as defined by the Company may
not be comparable with similarly named measures provided by other entities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">A reconciliation of GAAP net income (loss)
to Adjusted EBITDA follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD NOWRAP COLSPAN="14" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>(Unaudited)</B></FONT></TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD NOWRAP COLSPAN="6" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Three Months Ended</B></FONT></TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD NOWRAP COLSPAN="6" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Nine Months Ended</B></FONT></TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="6" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>September
    30,</B></FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="6" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>September
    30,</B></FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>2014</B></FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>2013</B></FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>2014</B></FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>2013</B></FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 48%"><FONT STYLE="font-size: 10pt">Net (loss) income</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">327,743</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">15,796</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">(1,683,008</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">(1,823,807</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 10pt">Reconciling items:</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD><FONT STYLE="font-size: 10pt">Interest - net</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(7</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(73</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(583</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(88</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 10pt">Depreciation and amortization</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">111,177</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">265,943</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">454,971</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">802,402</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">Stock-based compensation costs</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">5,685</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">5,299</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">10,266</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">27,958</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 10pt">Adjusted EBITDA</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">444,598</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">286,965</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">(1,218,354</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">(993,535</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Off-Balance Sheet Arrangements </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have never entered into any off-balance
sheet financing arrangements and have never established any special purpose entities. Other than our guarantee on the mortgage
of the property we lease from a related party, we have not guaranteed any debt or commitments of other entities or entered into
any options on non-financial assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Quantitative and Qualitative Market Risk Disclosure</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Financial instruments, which subject the
Company to concentrations of credit risk, consist primarily of cash and cash equivalents. The Company maintains cash between three
financial institutions. The marketable securities and short term investments are invested in money market funds and bank certificates
of deposit. The Company performs periodic evaluations of the relative credit standing of these institutions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Reverse Stock Split</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Effective on August
12, 2014 and commencing with the opening of trading on August 13, 2014, the Company effected a reverse stock split of the issued
and outstanding common stock, $0.001 par value per share, at a ratio of one-for-eight, with each eight (8) issued and outstanding
shares of the common stock automatically combined and converted into one (1) issued and outstanding share of the common stock.
The reverse stock split was approved by stockholders holding a majority of the outstanding voting power at a special meeting of
stockholders held on August 12, 2014. All information in the consolidated financial statements and the notes thereto regarding
share amounts of the common stock and prices per share of the common stock has been adjusted to reflect the application of the
reverse stock split on a retroactive basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><A NAME="s1_12"></A>BUSINESS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Overview</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We were originally incorporated in the state
of New York in 1994 as Intelli-Check, Inc. In August 1999, we reincorporated in Delaware. On March 14, 2008, our corporation was
renamed Intelli-Check - Mobilisa, Inc. after the consummation of the merger with Mobilisa, Inc. (&ldquo;Mobilisa&rdquo;). At the
closing of the merger, our headquarters were moved to Port Townsend, Washington. On October 27, 2009, we made a further change
in our name to Intellicheck Mobilisa, Inc. On August 31, 2009, the Company acquired 100% of the common stock of Positive Access
Corporation (&ldquo;Positive Access&rdquo;), a developer of driver license reading technology. The acquisition of Positive Access
expanded the Company&rsquo;s technology portfolio and related product offerings and allowed the Company to reach a larger number
of customers through Positive Access&rsquo;s extensive distribution network.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We plan to expand our business in the near
term by pursuing a research and development strategy designed to move our technologies into new product markets that are expected
to benefit from enhanced safety, regulatory compliance and fraud prevention. For example, we anticipate extending our technologies
into the healthcare and first responder spaces and to online applications to provide enhanced safety, regulatory compliance and
fraud prevention for the billions of transactions that occur there each day.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As a complement to these new offerings,
we are also developing a data analytics platform to analyze the data we capture and to provide meaningful data, trend and predictive
analysis to a variety of customers in the commercial and government spaces.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We plan to leverage our IP in the new markets
we are targeting to strengthen our competitive position.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our primary businesses include Identity Systems products, which
include commercial applications of identity card reading and verification and government sales of defense security and identity
card applications, and the development of wireless security applications.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our technologies address problems such as:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Commercial Fraud and Risk Management &ndash; which may lead to economic losses to merchants from check cashing, debit and credit
card, as well as other types of fraud such as identity theft that principally use fraudulent identification cards as proof of identity;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Instant Credit Card Approval &ndash; retail stores use our technology to scan a Driver&rsquo;s License at a kiosk or at the
Point Of Sale (POS) and send the information to a credit card underwriter to get instant approval for a loyalty-branded credit
card. This technique protects consumer data and is significantly more likely to result in a completed transaction compared to in-store
personnel asking customers to fill out a paper form;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Unauthorized Access &ndash; our systems and software are designed to increase security and deter terrorism at airports, shipping
ports, rail and bus terminals, military installations, high profile buildings and infrastructure where security is a concern;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Inefficiencies Associated With Manual Data Entry &ndash; by reading encoded data contained in the bar code and magnetic stripe
of an identification card with a quick swipe or scan of the card, where permitted by law, customers are capable of accurately and
instantaneously inputting information into forms, applications and the like without the errors associated with manual data entry;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Marine Environment Communications &ndash; our Wireless Over Water&reg; technology allows for instant communication between
multiple points, both on land and at sea, across wide, over-water expanses and optimizes performance by taking into account sea
state and Fresnel zones (Fresnel zones result from obstructions in the path of radio waves and impact the signal strength of radio
transmissions); and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Wireless Network Design and Hazard Assessment &ndash; our AIRchitect&reg; tool designs optimum wireless networks based on user
parameters and location architecture, and our Radiation Hazard (RADHAZ) tool identifies and assesses radio frequency (RF) exposure.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Identity Card Reading and Verification Sector </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Background on Identification Documentation</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>Driver license</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The driver license is the most widely used
form of government issued photo identification in North America. The Real ID Act, which became federal law in May 2005, recognizes
that the driver license is also a quasi-identification card. In addition to its primary function, the driver license is used to
verify identity for social services, firearm sales, check cashing, credit card use and other applications. Our technology can read
the data on all currently encoded driver licenses (even those that do not comply with the AAMVA/ANSI/ISO standards). Currently,
the fifty states, the District of Columbia, and ten Canadian Provinces encode their licenses. We believe that the number of readable
licenses will continue to grow as the jurisdictions currently not encoding begin issuing encoded documents, and the remaining Canadian
jurisdictions begin to issue encoded documents to meet the mandates put forth in the Real ID Act.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>Non-driver identification card</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Since many people do not have a driver license,
numerous jurisdictions offer other identification cards that may contain encoded information. These non-driver identification cards,
as well as military IDs, are fundamentally identical to driver licenses. Because driver licenses are the most widely used form
of legally acceptable government documentation, we refer to all these types of legally acceptable governmental identification documents
as &ldquo;driver licenses.&rdquo; Our ID&radic;Check<SUP>&reg;</SUP>software is equally capable of performing its function with
these other types of government identification.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Current Challenges Associated with Verifying Identification
Documents</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The high-tech revolution has created a major
problem for those who rely on identification documents. In an age where scanners, computers and color printers are commonplace,
fake IDs of the highest quality are easily obtainable from a number of locations including college campuses and from multiple sites
on the Internet. These fakes appear so real, even law enforcement agencies have encountered difficulty distinguishing them from
legally issued documents. Additionally, these high-tech devices have the ability to easily alter properly issued ID. Therefore,
anyone can gain access to a false identity that gives them the ability, in a commercial transaction, to present fake and stolen
credit cards or checks that are supported by false identification. Additionally, starting with only a fraudulent driver license,
an individual may be able to create multiple identities, commit fraud, evade law enforcement and engage in other criminal activities, such as:&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>committing identity theft;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>purchasing age restricted products such as alcohol and tobacco while under age;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>improperly boarding airplanes;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>engaging in medical fraud;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>committing credit card, debit card and check cashing fraud;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>obtaining welfare or other government benefits;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>committing pharmacy fraud, including obtaining false narcotic prescriptions;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>committing refund fraud;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>gaining entrance to high profile buildings and sensitive infrastructures; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>illegally purchasing firearms.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Given the ease with which identification
can be falsified, simply looking at a driver license may not be sufficient to verify age or identity and determine whether or not
it is fraudulent. Since merchants are facing significant economic losses due to these frauds, we believe that a document verification
system which can accurately read the electronically stored information is needed. We possess patented technology that provides
an analysis of the data contained on the encoded formats of these identification documents by reading and analyzing the encoded
format on the magnetic stripe or bar code on the driver license and comparing it against known standards. We believe that we are
the only company able to do this for all U.S. jurisdictions and that no other company could provide a similar service without infringing
on our patents.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Our Products and Services</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our Products and Services can be categorized
into two main areas, Identity Systems and Wireless Security. Our Identity Systems are marketed to the Commercial and Government
identification sectors. In addition to the products and services listed below, we provide design, engineering and integration services
for commercial Wireless communications systems.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Commercial Identification</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>ID&radic;Check<SUP>&reg;</SUP> Family
&mdash; Solutions and Benefits</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our patented ID&radic;Check technology is
our advanced document verification software. ID&radic;Check is contained in our software products, and is capable of reading and
verifying in one swipe or scan the encoded format contained on U.S. and Canadian driver licenses, state issued non-driver identification
cards, and military IDs. Our technology has the ability to verify the encoded formats on all currently encoded documents, even
those that do not comply with the standards of the American Association of Motor Vehicle Administrators (&ldquo;AAMVA&rdquo;),
the American National Standards Institute (&ldquo;ANSI&rdquo;) and the International Standards Organization (&ldquo;ISO&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We believe that ID&radic;Check and our family
of software solutions contain the most advanced, reliable and effective technology, providing users with an easy, reliable, and
cost-effective method of document and age verification. We have received encoding formats from all of the issuing jurisdictions
in North America. This information, combined with our patented technology, enables all of our ID&radic;Check software products
to read, decode, process and verify the encoded formats on driver licenses. As jurisdictions change their documents and guidelines,
we believe our software can be adapted to these changes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">ID&radic;Check software does not require
a connection to a central database to operate, thus negating privacy concerns. Many of our products have the ability to operate
add-on peripherals such as printers, fingerprint readers and other devices. The ID&radic;Check process is quick, simple and easy
to use. After matching the driver license photograph to the person presenting the document for identification, the user simply
swipes the driver license through the data capture device. The software quickly determines if:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the format of the document is valid;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the document has been altered or is fake, by displaying the parsed, encoded data for comparison with the printed information;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the document has expired; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>being used for age verification, the encoded data contains a date of birth equal to or greater than the legal age to purchase
age restricted products, such as alcohol and tobacco.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Then, the ID&radic;Check<SUP>&reg;</SUP>software applications
can:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>respond to the user by displaying the format verification result and the parsed information;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>save information that is permissible by law to memory; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>print a record of the transaction including the verification results, if a printer is part of the hardware configuration.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>ID&radic;Check<SUP>&reg;</SUP>SDK</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our software product, ID&radic;Check SDK,
is designed for software developers that wish to incorporate our ID&radic;Check technology into their applications. It contains
our proprietary technology, as well as a device controller, which is also capable of reading the smart chip contained in the military
CAC. We currently have multiple license agreements with third parties for integration and sub-licensing of our software applications
into their core applications. The SDK is available for multiple platforms such as Microsoft Windows, Windows Mobile, AIX, and certain
versions of Linux. It can easily be ported to other platforms as the need arises.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>ID&radic;Check<SUP>&reg;</SUP>POS</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">ID&radic;Check POS is a software application
that runs on multiple VeriFone devices, such as the Omni 37xx series. Our software uses both the onboard magnetic stripe reader
and an optional external 2-D bar code reader that plugs into an open port on the back of the unit. The terminal has an integrated,
high-speed thermal printer. The VeriFone devices are multi-application terminals that allow the ID&radic;Check software to run
side by side with credit card processing software as well as other value added software applications certified by VeriFone. We
have been designated as a VeriFone value added partner.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>ID&radic;Check<SUP>&reg;</SUP> BHO</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">This software product, formerly called the
Web Form Filler product, is a Browser Helper Object (&ldquo;BHO&rdquo;) for Internet Explorer. The BHO allows our customers to
seamlessly integrate our core ID&radic;Check technology into their web based applications. The BHO can be programmed through a
series of drop down menus to populate driver license data in the fields of specific web pages based on web page URLs and web page
field names. The technology also provides the ability to check the encoded formats of ID documents.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>ScanInn<SUP>TM</SUP></U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">ScanInn is a software application that speeds
up check-in and ID verification at hotels and motels. This product builds on the BHO and ID&radic;Check PC to enhance user productivity
by automating data entry thus improving accuracy. ScanInn allows the check-in at a hotel to occur in seconds and is incorporated
into legacy Property Management Systems.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>AssureScan<SUP>TM</SUP></U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">AssureScan is an application that assists
pharmacies with ID verification and tracking drug related purchases. This product focuses on capturing data from drivers&rsquo;
licenses and tracking the sale of controlled medicines such as pseudoephedrine. Many states are now monitoring the sale of controlled
medicines and this product tracks those sales.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>ID&radic;Check<SUP>&reg;</SUP> PC</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">ID&radic;Check PC is a standalone software
solution that is designed to provide the features of ID&radic;Check for Windows based platforms. It may be used only where permitted
by law, since certain jurisdictions restrict using this information without customer consent. It allows the user to instantly view
data from driver licenses as well as from the smart chip contained in the military common access card (CAC), for further verification
and then archives it into a personal computer. It contains features such as recurring entry and age verification.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>ID&radic;Check<SUP>&reg;</SUP>Mobile</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">ID&radic;Check Mobile is the designation
for multiple hand held devices that we offer our customers. The form-factor is a small, lightweight mobile computer with a durable
housing design that has 2-D bar code, magnetic stripe and/or Smart card reading capabilities. By allowing the user to move between
locations, ID&radic;Check Mobile products provide the ability to check the encoded format of ID documents at multiple entry points.
It additionally has the capability of providing a yes/no response when used for age verification purposes.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&#9;<U>Data Collection Devices</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our software products are designed for use
with multiple data collection devices, which are commercially available in various compact forms and may contain either one or
both of two-dimensional bar code and magnetic stripe readers. These devices enable our software applications to be used on a variety
of commercially available data processing devices, including credit card terminals, PDAs, tablets, laptops, desktops and point-of-sale
terminals. Many of these devices contain an electronic serial number (ESN) to prevent unauthorized use of our software.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>Instant Credit Application Kiosk Software
Applications</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">These are custom software applications
that Intellicheck Mobilisa has developed for a variety of major financial service companies and retail stores. The software
installed on multiple kiosk devices provides the customers of the major financial service companies and retail stores with
the ability to perform in-store instant credit approval on these devices. The hardware platforms, on which the
software applications run, range from stationary devices to handhelds to tablet PCs. The process involves the swiping or
scanning of the driver license to verify the encoded format and after verification, the information parsed from the encoded
data is populated into the proper fields on the application displayed on the kiosk. The applicant then completes the
application by entering the remaining required information that is not encoded on the driver license, such as social security
and telephone numbers. The software application then sends the data to the financial service company&rsquo;s
backend &ldquo;decisioning&rdquo; tool for credit approval. If approved, the applicant is granted instant credit which can
then be used to make purchases.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>Upgrade Capability</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">All of the ID&radic;Check products may be
updated as states and provinces adjust or modify the format of their electronically stored information. We distribute jurisdictional
updates in a variety of ways depending on the product in use. Our technology can be upgraded by the installation of a file sent
on an SD card, CD and/or e-mail to the customer. One of our products can be upgraded by modem using a dial-up phone connection.
Jurisdictional Updates are included in the purchase price of Intellicheck Mobilisa products for the first year after purchase.
We sell upgrade packages for the period commencing after the first year of purchase. We have also developed an automated remote
update system that customers can use to automatically download and install updates. This product is currently being used in instant
credit kiosk applications.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Government Identification</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>Defense ID<SUP>&reg;</SUP> System</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our Defense ID System offers law enforcement
personnel and military security officers additional information for protecting their facilities. The Defense ID System uses rugged,
handheld, mobile devices and desktop visitor/vendor approval workstations to read barcodes, magnetic stripes, RFID (radio frequency
identification) and OCR (optical character recognition) codes printed on current forms of identification cards. By scanning and
comparing the information contained on the ID card to over 100 databases, Defense ID can immediately determine if the card has
been reported lost or stolen, the individual&rsquo;s identity information matches watch lists or law enforcement databases, or
if they are on an authorized roster of previously-cleared personnel. In 2008, our Defense ID System received a U.S. Navy-wide certification
and accreditation referred to as an Authority to Operate (&ldquo;ATO&rdquo;), and in 2009, our Defense ID System received U.S.
Army-wide, U.S. Marine Corps-wide and U.S. Air Force-wide ATOs. We believe these ATOs will facilitate further deployment of the
Defense ID System at military bases and facilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>Fugitive Finder</U>&trade;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our Fugitive Finder product builds on our
patented ID reading technology. Fugitive Finder quickly scans various forms of IDs, such as driver&rsquo;s licenses, military IDs
or passports, and instantly compares the data to law enforcement databases. Comparing it to our Defense ID product, it has several
enhancements and a key distinction is that some of the accessible data is so sensitive; in order to use Fugitive Finder you need
to be a member of Law Enforcement (e.g. a police officer or federal agent). The enhancements and changes include:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>FiPS 201 certification, which is a federal ID certification standard,</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>ability to search NCIC, which is a law enforcement only FBI managed gold standard database,</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>capability of biometrics validation to the card when applicable,</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>adding a Military Credentials Live Check</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>long-term vetted vendor cards.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>TWIC reading capability</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">For police officers, when they pull over
a vehicle, a dangerous period of interaction is when they take the driver&rsquo;s ID and walk back to their cruiser to run a background
check. It gives the driver in question and passengers time to reach for weapons, knowing the officer will be coming back to make
an arrest. If instead the officers were able to do that check wirelessly after securing the vehicle, never having to turn return
to their cruiser, their exposure would be drastically reduced.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: 0.25in"><U>TWIC Reader (IM 2700)</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">One of the first readers on the Department of Homeland Security&rsquo;s
Initial Capabilities List of devices, the IM2700 verifies the Character Unique Identifier, Certificates of Authenticity, Biometrics
and Personal Identify Number on the Transportation Worker Identification Credential (&ldquo;TWIC&rdquo;). The TWIC reader can also
be incorporated into all aspects of the Defense ID System. The Department of Homeland Security (&ldquo;DHS&rdquo;) regulations
required that all workers at ports must have a card by April 15, 2009.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>Visitor Center (IM 3000)</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Visitor Center is a component of our Defense ID or Fugitive
Finder systems and makes it faster and easier to process visitors and vendors. Using the visitor center system it pre-populates
fields by scanning the government-issued ID, performs a real time background check utilizing over 100 databases to verify the individual
is not on a wanted list and also if the individual has been pre-approved to access the facility or building. The Visitor Center
can then take photos and prints a visit pass or new local ID card, all in a matter of seconds.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>Upgrade Capability</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Like our ID&radic;Check products, our Defense ID products are
constantly updated to stay current with identification formats and new forms of ID. In addition, we continuously update the databases
related to lost or stolen cards, watch lists and law enforcement database updates, and authorized rosters of cleared personnel.
Our Defense ID Systems are maintained via annual subscriptions that are purchased by our customers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Wireless Security Products and Services</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>Wireless Over Water<SUP>&reg;</SUP> Technology
(&ldquo;WOW&trade;&rdquo;)</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">WOW technology was first developed to allow
passengers of moving vessels, for example passenger ferries, high rates of data transfer through wireless 802.11 networking. WOW
technology allows users to access the Internet while in motion on water. WOW was used to develop the Floating Area Network technology.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>Floating Area Network<SUP>&reg;</SUP>
(&ldquo;FAN&trade;&rdquo;)</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">FAN technology was developed for the US Navy. FAN utilizes WOW
technology to create a mesh type network for Navy Vessels underway and provides an alternative and less expensive communications
methodology for the US Navy. Vessels may dynamically join and depart the network while underway at sea.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>Aegeus Wireless Security Buoy and Littoral
Sensor Grid (&ldquo;LSG&rdquo;)</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">LSG is the next evolution of WOW and FAN. Using the technology
developed for WOW and FAN, we incorporated the use of buoys to provide both security and environmental monitoring. Varieties of
sensors measure/monitor anything above, on, or below the water and provide that information real time to an operations control
center. This technology allows for security monitoring of our harbors and waterways both from a terrorist attack or accidental
environmental conditions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>AIRchitect<SUP>&reg;</SUP></U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">AIRchitect is a wireless LAN design expert
system that is tailored to military ships, installations and infrastructure. This product uses blueprint drawings in AutoCAD or
Visio format and allows a network engineer to optimally design a wireless network including the best location for access points
and uses requirements of users, throughput performance, interference, physical structures, and co-channel interference.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Strategy </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our objective is to be a leading security
company providing world class solutions in the identity and wireless industry sectors. These solutions include our commercial identity
systems focusing on work-flow, productivity enhancement, fraud protection and risk management segments; our government identity
systems focusing on access control, vendor validation, and suspect identification; and our wireless security systems, focusing
on wireless networking over water, and wireless network planning. Key elements of our strategy are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Commercial Systems</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>Productivity Enhancement.</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We market our technology as a key productivity
enhancement tool. Our patented ID&radic;Check software can add functionality to virtually any given software application to automatically
populate fields within a given form, when a government-issued&nbsp;photo ID is presented. Our ability to correctly read all US
jurisdictions is a key differentiator from our competitors. The automation that results from the intelligence added to the form
dramatically increases throughput and data integrity, and it significantly enhances the customer's experience.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>Develop Additional Strategic Alliances
with Providers of Security Solutions</U>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have entered into strategic alliances
to utilize our systems and software as the proposed or potential enrollment application for their technologies and to jointly market
these security applications with multiple biometric companies: AMAG Technology, Inc., in the defense industry; Roper Industries,
Inc. (DAP) and Motorola, Inc. hardware manufacturers; and Digimarc Corporation and L1 Identity Solutions, Inc. now part of Safran,
producers of driver licenses for approximately 90% of the jurisdictions in North America. We are also a member and board member
of The Federation for Identity and Cross-Credentialing Systems or (FiXs) and a member of the Industry Advisory Board of AAMVA.
We believe these relationships will broaden our marketing reach through their sales efforts and we intend to develop additional
strategic alliances with additional providers of security solutions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>Strengthen Sales and Marketing Efforts</U>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We intend to capitalize on the growth in
demand for document verification and productivity enhancement by continuing to market and support our systems and software. Our
sales and marketing departments are organized by target sector rather than geographic area to provide focus and create experts
in each area. Our recent focus has been on large enterprise-wide license arrangements in the financial services, retail, and hospitality
services industries.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>Enter into Additional Licensing Agreements</U>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We intend to continue to license our software
for use with a customer's system. We are currently licensing our ID&radic;Check SDK software product for Windows, Windows CE, Windows
Mobile and other operating system platforms and intend to similarly continue to license our ID&radic;Check PC, and ID&radic;Check
PDA software solutions. Our software is intended to be used with a compatible hardware device. We have entered into multiple<FONT STYLE="color: red">
</FONT>licensing agreements to date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>Protect Intellectual Property</U>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We intend to strongly protect our
intellectual property portfolio in order to preserve value and obtain favorable settlements where warranted. For example, in
February 2003, we filed suit against CardCom, Inc. d/b/a CardCom Technology, Inc., claiming that CardCom had infringed one of
our patents. Subsequently, we entered into a patent licensing agreement with CardCom effective March 2003 which provided for
a non-exclusive three year license in connection with the manufacture, use and sale of CardCom's age verification products in
the United States and Canada, which has since expired.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Government Identity Systems&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>Product Enhancement.</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Due to the success of Defense ID in the
military and government industry sectors, we intend to enhance our product line to support other entities such as law enforcement,
port security and commercial installations. We continue our ongoing efforts to research and implement the use of new identification
cards, additional databases and upgraded equipment form factors in order to increase the efficiency and performance of the system.
We will also continue to work with the information technology and privacy units within all branches of the military to maintain
branch-wide ATOs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>TWIC Program.</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The TWIC program continues to undergo testing
for final rules regarding the reader technology. We were on the first list of ICE readers and will continue to provide our software
on additional hardware platforms to address the unique needs of each port. We are also combining our Defense ID and TWIC reader
applications to provide customers with the benefits of each product in a single device and have submitted this for new government
certification program called QTL (Qualified Technology List).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>Strengthen Sales and Marketing Efforts.</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As the need for access control systems continues
to grow, our experienced sales and marketing departments are adjusting to target new sectors. Sales and marketing materials are
specially designed to clearly outline the capabilities of the system and how it is valuable to each of these specific sectors.
We have sales staff and office locations on the West Coast and East Coast, which allows a quick response to questions and personalized
assistance for each customer based on location.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>Additional Access to Multiple Databases.</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We continue to increase the data source
information accessed through our Defense ID system. This is achieved by increasing the capabilities of our internally-developed
scraping programs for publicly-available information as well as by negotiating additional data source agreements with various law
enforcement and government agencies. In addition to these general databases, we customize databases for each individual customer
based on information provided by the customer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Wireless Systems</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>Research and Development.</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our wireless security systems program has
been primarily research and development funded by the federal government. We intend to continue to pursue research and development
projects through funding from various government agencies for research and development work in the wireless and security arenas,
while at the same time, pursuing commercialization of these products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>Buoy Systems</U>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The company has completed a US Navy funded
program to develop security buoys capable of persistent ISR (intelligence, surveillance, and reconnaissance). These are capable
of protecting high value assets such as oil platforms, Liquid Natural Gas refineries, military ports, or active shipping channels.
Potential customers in include oil and LNG companies, Coast Guards, military, Department of Homeland Security, and border patrols.
These systems are being marketed to US and friendly overseas countries.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>Enterprise Wireless</U>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have started a new initiative of building
advanced wireless infrastructure that can be used by telecom companies to supply very high speed broadband to schools, libraries,
hospitals, government agencies, and commercial customers. Recently the company completed a project in the Spokane area and is currently
engineering and installing enterprise wireless networks in Western Washington State. As the nation&rsquo;s demands increase for
wireless capability the Mobilisa division of IDN is prepared to build that infrastructure.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Company enjoys a good
relationship with its current customers and continues to receive funding for additional research and development work
stemming from projects already completed or in process. We will continue to work with these customers to determine how best
to continue to create innovative solutions that meet customers&rsquo; changing technological needs. For example, our research
and development efforts in FAN and in the Littoral Sensor Grid have the potential of revolutionizing ship-to-ship and
ship-to-shore communications. The U.S. Navy, as well as other agencies and commercial customers, will greatly benefit from
the successful development of these technologies, and we intend to continue to pursue these industry sectors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Our Revenue Sources</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We derive our revenue from the following
sources:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Sales of our systems by both our own direct sales force and marketing partners;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Per transaction or subscription fees from the licensed use of our technology;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Royalties and licensing fees from licensing our patented technology to third parties;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Revenue sharing and marketing arrangements through strategic alliances and partnerships;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Sale of software upgrades and extended maintenance programs; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Government grants for research and development projects.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Our Target Industry Sectors</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Commercial Identity Systems</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The use of false identification cards, primarily
driver licenses and non-driver identification cards, to engage in commercial fraud, to gain access to unauthorized areas and to
gain entry to critical infrastructure is common. Given the ease with which identification can be falsified, we believe that simply
looking at a driver license may not be sufficient to verify identity and determine whether or not such an identification card is
fraudulent. Since merchants are facing significant economic losses due to these frauds, we believe that what they need is a document
verification system that can accurately read the electronically stored information. We target the industry sectors that would most
benefit from our systems and software.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We also market our products to opportunities
where our ID&radic;Check technology can be used to enhance productivity. We have made significant progress in the sectors for the
retail issuance of instant credit. We believe there are financial benefits and compelling business models for customers in this
sector to utilize our technology.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>Productivity Enhancement </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Mass merchandisers and retailers</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Auto dealerships and rental car agencies</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Banks and other financial institutions</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Casinos for enrollment of guests</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Credit unions</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Hospital patient admissions</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Credit card issuers</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Lodging Industry</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Check cashing services</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Airlines</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>Commercial fraud protection</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Mass merchandisers and retailers</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Auto dealerships and rental car agencies</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Banks and other financial institutions</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Casino cage operations</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Credit unions</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>


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    <!-- Field: /Page -->

<P STYLE="font: 10pt Symbol; margin: 0pt 0"></P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Hospitals, medical facilities, health plans and first responder</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Credit card issuers</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Lodging Industry</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Check cashing services</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Pharmacies</TD></TR>                                                                                                                                      <TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Online application</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>Access control</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Airports and airlines</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Nuclear facilities</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Departments of Motor Vehicles</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Oil refineries and storage facilities</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Prisons</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Military establishments</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Law enforcement agencies</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>College campuses</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Notable buildings</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Department of Homeland Security</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Court houses</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Bus, rail and port facilities</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>Age verification </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Bars and night clubs</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Stadiums and arenas</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Convenience stores</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Casinos and gaming establishments</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Grocery chains</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Sellers of sexually explicit material</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Restaurants</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Firearm dealers</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Government Identity Systems</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our Defense ID system is tailored to locations
that validate identification cards as a means of access. Historically, the military sector has been the primary focus, followed
closely by the law enforcement sector. Military bases, for example, are an ideal location for the use of the Defense ID system
because individual ID cards are checked prior to allowing base access and, in most cases, bases issue visitor/vendor passes to
individuals needing access that do not possess a military ID.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Because Defense ID is customizable, it can
be used in many different environments. The information provided via instant access to multiple law enforcement databases proves
invaluable to gate officers and law enforcement personnel ensuring the security of a facility. Current targets include:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>Military </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Army</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Navy</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Air Force</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Marines</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Coast Guard</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Military Academies</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Military and Veterans Hospitals</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><U>Law Enforcement/Government</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>FBI</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Drug Enforcement Administration</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>State Police</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Local Sheriffs</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Bureau of Alcohol, Tobacco, Firearms, and Explosives</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Intelligence Agencies</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Customs</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Department of Transportation</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Department of Homeland Security</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Border Patrol</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Wireless Security Systems</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We provide wireless services, including
wireless environment analysis, custom wireless network design, wireless communication system installation and application and custom
wireless application development, to a range of customers across a variety of industry sectors. Our AIRchitect&reg; product enables
us to design a wireless network for a variety of different facilities. In addition to designing shipboard networks for
the U.S. Navy and the Washington State and British Columbia Ferries, we target metropolitan areas, warehouses, hospitals, public
transportation providers and other businesses requiring wireless design and specialty services. Our WOW technology can be adapted
for a variety of forms of transportation, including buses and trains, and the Company continues to further explore potential customers
in those sectors. Our target customer for both FAN and the Littoral Sensor Network is the U.S. Navy, off-shore oil rig asset protection,
and sea ports.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Representative Customers</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Commercial Identity Systems</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have generated revenues from our customers from the sale
of systems, licensing of software and sale of software upgrades. The following representative customers are using our systems and
software for commercial fraud protection and productivity enhancement:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 85%; border-collapse: collapse; margin-left: 0.25in">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 5%"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="width: 35%"><FONT STYLE="font-size: 10pt">Fidelity Information Services</FONT></TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 5%"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="width: 53%"><FONT STYLE="font-size: 10pt">Foxwoods Resorts and Casino</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">MGM Grand</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Mohegan Sun Resort Casino</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Caesar&rsquo;s Palace</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Barclaycard USA</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Enterprise</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">JPMorgan Chase</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Toys R Us</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">LL Bean</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Alliance Data</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">GE Consumer Finance</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Rooms to Go</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">AT&amp;T</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Wal-Mart</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Winn Dixie</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following representative customers and
programs have used or are using our systems and software for access control:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 85%; border-collapse: collapse; margin-left: 0.25in">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 5%"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="width: 35%"><FONT STYLE="font-size: 10pt">John F. Kennedy International Airport in New York</FONT></TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 5%"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="width: 53%"><FONT STYLE="font-size: 10pt">Vermont Department of Motor Vehicles</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">O&rsquo;Hare International Airport in Chicago</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Delaware Department of Motor Vehicles</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Reagan National Airport in Washington, DC</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Port of Houston</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">New York Stock Exchange</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">New Hampshire Department of Motor Vehicles</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Fort Sam Houston</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Port Authority of New York and New Jersey</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Fort Hood</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Port of Hawaii</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Force Protection Industries</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">United States Supreme Court</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">New York Department of Motor Vehicles</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Registered Traveler Program</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following representative
customers are using our systems and software for age verification:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Idaho State Liquor Dispensary</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Drake Petroleum</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Sunoco</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Houston&rsquo;s Restaurants</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Exxon/Mobil franchisees</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Government Identity Systems</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have generated revenue from our customers
from the sale of systems, licensing of software and sale of extended service agreements. The following representative customers
have used or are using our systems and software for security and identification purposes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 85%; border-collapse: collapse; margin-left: 0.25in">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 5%"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="width: 35%"><FONT STYLE="font-size: 10pt">The United States Air Force Academy</FONT></TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 5%"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="width: 53%"><FONT STYLE="font-size: 10pt">Fort Richardson</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Fort Wainwright</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Bolling AFB</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Elmendorf Air Force Base (&ldquo;AFB&rdquo;)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Fort Polk</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Andrews AFB</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Fort Dix</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Fort Meade</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Yuma Marine Corps Base</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Fort Belvoir</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Walter Reed Army Hospital</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">USMC Parris Island</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">McChord AFB</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">The U.S. Military Academy at West Point</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Claremont County Sheriff Department</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Bangor Naval Submarine Base</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Fort Sill</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Fort Jackson</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">29 Palms</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Fort Leonard Wood</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Camp Atterbury</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Fort Benning</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Fort Stewart</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Wireless Communications Systems</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following representative
customers have used our wireless solutions, including AIRchitect:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 85%; border-collapse: collapse; margin-left: 0.25in">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 5%"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="width: 35%"><FONT STYLE="font-size: 10pt">United States Navy</FONT></TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 5%"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="width: 53%"><FONT STYLE="font-size: 10pt">United States Air Force</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Sound and Sea Technologies</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Science Application International Corporation</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">British Columbia Ferries</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Washington State Ferries</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Port Townsend Paper Company</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Mikros Systems Corporation</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Parsons Corporation</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">National Center for Manufacturing Sciences</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">NASA</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">NoaNet</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Marketing and Distribution</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Commercial Identity Systems</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our objective is to become the leading developer
and distributor of document and age verification products. To date, our marketing efforts have been through direct sales by our
sales and marketing personnel, through resellers and license agreements. We are marketing our products through direct marketing
approaches such as web marketing, a small number of select trade shows and well known public interest and trade associations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We generate revenues from the licensing
of our software and the selling of bundled solutions that contain hardware and software. Depending on the specific needs of our
clients, we tailor the right solution for them. Our bundled solutions, which include, but are not limited to, our ID&radic;Check
Mobile and ID&radic;Check POS technology, offer multiple pricing options. We also generate revenues from various new software solutions
that are based upon a per transaction or subscription model.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our ID&radic;Check software runs on Microsoft
Windows and Windows Mobile platforms in addition to devices such as credit card terminals and other operating systems such as Linux.
We are marketing our ID&radic;Check technology to the government, airlines, airports, high profile buildings or infrastructure,
mass merchandisers, grocery, convenience and pharmacy chains, casinos and banks.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have developed a comprehensive marketing
plan to build customer awareness and develop brand recognition in our target industry sectors. We promote the advantages and ease
of use of our products through:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Endorsements by nationally known public interest groups and trade associations;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Web seminars, as well as our own website; and&nbsp;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Trade publications;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Various conventions and industry specific seminars.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Trade shows;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As we gain industry acceptance for our ID&radic;Check technology,
we intend to develop and market other related software applications.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Government Identity Solutions</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have sector-specific brochures for each
product in our product line for both the military and law enforcement sectors that the sales force utilizes when demonstrating
the Defense ID system to potential customers. These brochures serve as a quick reference guide outlining the capabilities of our
technology. Once customers have a clear understanding of our products, they can use these brochures to discuss their individual
needs and ordering requirements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">When dealing with military and government
entities, we must comply with applicable procurement regulations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition to sole source awards, we also
respond to Requests for Proposal (&ldquo;RFPs&rdquo;) and Requests for Qualifications (&ldquo;RFQs&rdquo;) when our technological
capabilities meet that of the desired system. In many cases, we are the only company that is able to meet the requirements in the
RFP, which can lead to a quick and easy award.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Also, we have all Defense ID products, as
well as individual labor services, listed on GSA Schedule 70. This makes it possible for government entities to make direct purchases
of equipment and services for a pre-negotiated price without competition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have offices in Port Townsend, WA and
Jericho, NY to support our current and potential customers. This makes it easy to schedule and complete installations and
maintenance in an efficient, time-conscious manner.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Wireless Security Systems</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Marketing for our wireless products and
capabilities is performed primarily via our website and tradeshow exhibitions, as well as through direct contacts with government
agencies. We attend market-specific tradeshows to demonstrate current products and capabilities. We pride ourselves on being an
innovative solutions provider and this is a prime arena for showcasing the Company&rsquo;s talents and for interfacing with potential
customers who can benefit from our wireless solutions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have recently signed partnerships with
foreign companies to assist in bringing our wireless technologies, products and services to their countries.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Many of our potential wireless customers
contact the Company after seeing publicity about current wireless projects. Our wireless systems have garnered both local and national
publicity, which has been beneficial in projecting to the public the Company&rsquo;s capabilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Major Customers</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Although the composition of our largest
customers has changed from year to year, a significant portion of our revenues have been attributable to a limited number of major
customers. In 2013, our Wireless Installations subcontracting with Northwest Open Access Network accounted for approximately 17%
of total revenues. In 2012, AT&amp;T, our Wireless R&amp;D contract with the U.S. Navy, and TWIC sales to the State of Hawaii accounted
for approximately 15%, 14%, and 11% of our total revenues, respectively. While we believe that one or more major customers could
account for a significant portion of our sales for at least the next two years, we anticipate that our customer base will continue
to expand and that in the future we will be less dependent on major customers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Regulatory</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The sale and use of the Company&rsquo;s
Identity System products are not subject to regulation by government authorities. We believe we are currently in compliance with
applicable United States, state and local laws and regulations relating to the protection of the environment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have made application for commercial
sale of the Company&rsquo;s Aegeus Wireless Security Buoys and for export authority to sell this product abroad. No assurance can
be given that such authority or licensing will be obtained or that current rules and regulations will not be changed in an adverse
manner.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Competition </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We compete in an industry that is relatively
new, intensely competitive and rapidly changing. Unless a device can read, decode and analyze all of the information that is legally
permitted to be analyzed, which is electronically stored on a driver license, the user may not obtain accurate and reliable confirmation
that a driver license is valid and has not been altered or tampered with. We are aware of several companies, including CardCom,
TriCom Technologies, ID-Logix and Legal Age that are currently offering products that electronically read and calculate age from
a driver license. We have tested and compared some of these products to ID&radic;Check and believe that our product is superior
in quality and functionality. We believe that units unable to read bar codes are at a significant disadvantage because most states
and Canadian provinces currently utilize bar codes to encode their driver licenses, as well as all U.S. military IDs and uniformed
services cards.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In the government identity sector, there
are several companies, including L-1 Identity Solutions (now part of Safran Group), and Core Street (now part of ActivIdentity
Corporation), that are currently offering products that compete with the Defense ID system. The U.S. government also has a product
called DBIDS&nbsp;that competes with our products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are also aware that Motorola and Honeywell
have started offering an embedded driver&rsquo;s license reading solution on a tether scanner that does not parse driver licenses
from all U.S. jurisdictions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have experienced and expect to continue
to experience increased competition in the document verification sector, and have to date experienced limited competition from
companies in the document verification sector. If any of our competitors were to become the industry standard or were to enter
into or expand relationships with significantly larger companies through mergers, acquisitions or otherwise, our business and operating
results could be seriously harmed. In addition, potential competitors could bundle their products or incorporate functionality
into existing products in a manner that discourages users from purchasing our products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In the wireless security sector, we develop
and apply WOW technology and believe that our Floating Area Network, Aegeus Wireless Security Buoy and Littoral Sensor Grid projects
will enhance the Company&rsquo;s standing with potential customers in the wireless industry. Several competitors have developed
technology that may compete with our products. These include EFJ, Inc., Sea-Mobile and Motorola. In addition, other defense or
wireless companies may be developing technology that will compete with our current products or with the projects and products that
are currently in research and development.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Manufacturing</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We do not manufacture readers or input devices,
but use products from several manufacturers. Some of these devices are private labeled and programmed by the supplier to work with
our ID&radic;Check technology. The majority of our hardware consists of commercial off-the-shelf (&ldquo;COTS&rdquo;) products.
We rely on a small number of suppliers to provide our COTS products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our government identity and wireless systems
products are created with COTS items that we customize with software and specialized configurations. All products are customized,
assembled, and tested in-house and then installed and placed by our employees in the field.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Research and Development</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our research and development efforts are
mainly concentrated in three areas. The most significant effort is concentrated in the Wireless sector in the Floating Area Network
and Littoral Sensor Grid projects, which are funded by government cost plus fixed fee contracts. In the identity sector, we modify
existing software applications based on customer&rsquo;s requirements, which are fee based. In addition, we develop new software
solutions and make improvements to existing software platforms, which are funded internally. R&amp;D spending during the years
ended December 31, 2013 and 2012 was $2,056,744 and $2,239,011, respectively, and for the nine months ended September 30, 2014
and 2013 was $1,327,376 and $1,592,056, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Intellectual Property</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In January 1999, the U.S. Patent and Trademark
Office granted us a patent on our ID&radic;Check software technology. In October 2002, we were granted another patent relating
to our document authentication and age verification technology. In January 2009, we were granted another patent that is a continuation
of our patents relating to our document authentication and age verification technology. Upon our acquisition of the assets of IDentiScan,
we also received equitable ownership and sole ownership rights to its intellectual property, including other patents and patent
applications relating to age verification technology.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">During 2010, we were granted two additional
patents. The first patent was for a software key control for mobile devices. It is used to get a registration key for the parser
that is based on the unique internal ID of one mobile device. The Mobile Key Manager communicates with the mobile device, reading
its ID, and then requests a registration key specific for that ID from Intellicheck Mobilisa&rsquo;s server. This server maintains
a database of all customers using IDecode Mobile Parsers, including the number of licenses they have purchased, the latest software
version for which they have paid support, and the registration keys and unique device IDs associated with those licenses. The server
generates a new registration key unique to the device ID, and returns it to the Mobile Key Manager to register that device. In
this way, the customer can deploy the IDecode Mobile Parser to only one mobile device for each parser purchased.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The second patent was relating to a document
comparison system and reinforces the innovative nature of Intellicheck Mobilisa's security solutions involving documents. The technology
described in the patent relates to a system and method for comparing information contained in at least two documents. Like information
on different documents is compared to determine whether the information is the same on each document. For instance, a name contained
on an individual&rsquo;s driver&rsquo;s license is automatically compared with a name contained on the individual's airline boarding
pass.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In 2011, we were issued another patent.
This patent allows for verifying and authenticating the encoded information on driver licenses of all 50 states and other North
American driver licenses, and allows the information to be electronically transferred in a secure environment to a local or remote
jurisdiction for age verification, organ donor, or criminal activity checks critical in fighting both crime and terrorism.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In 2012, we were was granted a patent
relating to a system and method for comparing information contained in at least two documents, but not limited to just a driver
license and passport. This patent compares &ldquo;like information&rdquo; on different documents to determine whether the information
is the same on each document. As an example, a passport is compared to a boarding pass to determine &ldquo;like information&rdquo;
matches, for instance name and birthdate.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We were was also granted a patent
related to a system that uses environmental information to determine a level of scrutiny that is to be applied to received
identification information at a location where user identification is being checked. Depending on the level of scrutiny that
is applied and on generated candidate scores, the system will display a number of potential persons of interest that match
the received identification information.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In 2013, we were was granted four
patents that are continuations of earlier-filed applications we previously filed. One patent is related to a document comparison
system that compares information contained in two documents to determine whether the information is substantially identical
on each document. An indication is provided as to whether the two documents identify the same entity or do not identify the
same entity. The second patent relates to improvements to software key control for mobile devices. The third patent relates
to an apparatus for extracting date of birth information from driver&rsquo;s licenses and displaying a calculated age along
with a license background graphic. Finally, the fourth patent is related to a system that uses environmental information to
determine a level of scrutiny that is to be applied to received identification information at a location, and to display a
number of potential persons of interest that match the received identification information based on the applied level of
scrutiny.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In 2014, we were was granted one
patent that was also a continuation of an earlier-filed application. The patent is related to a document comparison system
that compares information contained in two documents to determine whether certain information is substantially identical on
each document. The system provides a positive or negative indication as to whether portions of the two documents
are substantially identical.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We currently hold sixteen (16) U.S. patents,
two (2) Canadian patents and one (1) United Kingdom patent. At present, we have other patent applications pending in the U.S. Patent
and Trademark Office as well as internationally. These patents cover commercially important aspects of our capabilities relating
to the authentication and verification of identification documents, and relating to our Defense ID System technology. We will continue
to pursue patents for all of our new technologies arising from our research and development efforts.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We own multiple copyrights in the United
States, which are effective in Canada and in other major industrial countries. The copyright protection covers software source
codes and supporting graphics relating to the operation of ID&radic;Check and other software products. We also have several trademarks
relating to our company, its product names and logos.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In connection with the sales or licensing
of our intellectual property, we have entered into an agreement with Mr. Kevin Messina, our former Senior Executive V.P. and Chief
Technology Officer, under which we will pay royalties equal to 0.005% of cumulative gross sales for cumulative gross sales of $2,000,000
to $52,000,000 and 0.0025% of cumulative gross sales for cumulative gross sales in excess of $52,000,000 pertaining to those patents
on which Mr. Messina was identified as an inventor. Cumulatively, as of September 30, 2014, total fees paid under this agreement
were about $1,650.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><A NAME="s1_13"></A><B><FONT STYLE="text-transform: uppercase">Employees</FONT></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"> As of January 7, 2015, we had 30 full-time
employees. Four are engaged in executive management, 16 in information technology, five in sales and marketing and five in administration.
All employees are employed &ldquo;at will.&rdquo; We believe our relations with our employees are generally positive and we have
no collective bargaining agreements with any labor unions. </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><A NAME="s1_14"></A>MANAGEMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Directors </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> Our Board of Directors and their respective
ages and positions as of January 7, 2015: </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; border-bottom: Black 1pt solid">Name</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Age</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Position with the Company<BR> and Principal Occupation</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Held Office<BR> Since</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 53%; text-align: left; text-indent: -10pt; padding-left: 10pt">Vice Admiral Michael D. Malone</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: center">&nbsp;</TD><TD STYLE="width: 10%; text-align: center">66</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 20%; text-align: left">Chairman of the Board</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: center">&nbsp;</TD><TD STYLE="width: 10%; text-align: center">2011</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Lieutenant General Emil R. Bedard</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">70</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD>Director</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">2008</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Major General Jack A. Davis</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">68</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD>Director</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">2014</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">William P. Georges</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">60</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD>Director</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">2014</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Guy L. Smith</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">65</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD>Director</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">2005</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Vice Admiral Michael D. Malone, U.S.
Navy, Retired, </I>was appointed Chairman of the Board effective November 13, 2012, and became a member of the Board of Directors
July 1, 2011. From November 2004 to February 2011, Admiral Malone was President of Skarven Enterprises, a designer and developer
of analytic approaches and technology applications specializing in real time/streaming data fusion and analysis for a variety of
applications in government, financial services, auditing and industry competitive intelligence. During his time at Skarven Enterprises
he led the company through a significant period of reorganization and growth, dramatically improving the company&rsquo;s research
and development efforts, and production and field support capability, while dramatically cutting costs and increasing revenue five-fold.
As a result of his efforts, Skarven Enterprises was acquired by The Boeing Company in December 2008. Admiral Malone remained President
of the company, as part of the acquisition agreement, until February 2011. Since leaving the military, Admiral Malone has also
served as a technical advisor and consultant to Pequot Capital, a venture capital firm (in 2006 and 2007) and Environmental Tectonics
Corporation, a high-technology simulation and manufacturing company (June 2007 to present). Admiral Malone was selected to serve
as a director in part due to his considerable experience as an officer in the U.S. military working with government contracts,
and his knowledge of the sectors in which the Company does business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Lieutenant General Emil R. &ldquo;Buck&rdquo;
Bedard, U.S. Marine Corps, Retired,</I> was appointed a member of the Board of Directors on March 14, 2008, General Bedard was
appointed a director of Mobilisa in September 2004. He retired from the U.S. Marine Corps with over 37 years of active duty service
in 2003. General Bedard&rsquo;s military career included two combat tours in Vietnam, as well as commanding the 7th Marine Regiment
in Somalia and the 1st Marine Expeditionary Force during Operation Desert Storm. General Bedard&rsquo;s final active duty tour
was as the Deputy Commandant for Plans, Policies and Operations for the U.S. Marine Corps Headquarters in Washington, D.C., where
he served until his retirement. He has continued to serve with the Marine Corps in Afghanistan and Iraq since his retirement. General
Bedard&rsquo;s many military awards include a Distinguished Service Medal, Legion of Merit and a Bronze Star (with Combat V). General
Bedard graduated from the University of North Dakota in 1967 with a M.S. in Science. General Bedard was selected to serve as a
director in part due to his considerable experience as an officer in the U.S. military working with government contracts and his
knowledge of the Company, including as a director of Mobilisa.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Major General Jack A. Davis, U.S. Marine
Corps, Retired,</I> was appointed a member of the Board of Directors on August 11, 2014. Major General Davis is a proven leader
in the military, law enforcement and business arenas. In a 37-year career in the United States Marine Corps, during which he rose
to the rank of Major General, he commanded at every level from an infantry platoon in Vietnam to Commanding General of the 4th
Marine Division. His final assignment prior to retirement was Vice Commander, Marine Corps Forces Atlantic/Deputy Commander Marine
Corps Forces Europe, for which he received the Distinguished Services Medal. He also served five years in federal law enforcement
before joining the North Carolina State Bureau of Investigation in 1979, retiring in 1999 with a distinguished record of service.
He also established JA Davis &amp; Associates, a frontrunner in leadership and security training development. He holds a Bachelor
of Science degree and two master&rsquo;s degrees. He previously served on Mobilisa&rsquo;s Board of Directors from October 2005
until the merger with Intellicheck in March 2008.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>William P. Georges</I> was appointed
a member of the Board of Directors on August 11, 2014. Mr. Georges is President and CEO of The Georges Group, LLC, a provider of
strategic consulting services and project management in the areas of corporate operations/relations to both public and private
entities worldwide. Prior to forming the firm, he spent nine years as senior vice president of The Century Council, overseeing
their development of programs to fight alcohol misuse, drunk driving and underage drinking. He is a retired 25-year veteran of
the Albany, NY Police Department where he ultimately achieved the rank of Assistant Chief/Chief of Patrol where he was responsible
for all uniformed police services. Mr. Georges is a life member of the International Association of Chiefs of Police. He serves
on the Traffic Law Enforcement Committee of the Transportation Research Board of the National Academies and has been recognized
by numerous organizations for his dedication to law enforcement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Guy L. Smith</I> was appointed a member
of the Board of Directors in June 2005. Mr. Smith has been the Executive Vice President of Diageo PLC, the world&rsquo;s leading
premium drink company, since 2000 and is responsible for corporate, government, and public relations and public policy, as well
as reputation management, corporate social responsibility and crisis management. At Diageo, Mr. Smith&rsquo;s responsibilities
include overseeing the corporation&rsquo;s civic and social responsibility efforts in North America, including the Diageo Marketing
Code. The code governs Diageo&rsquo;s social responsibility activities with regard to the marketing and sale of alcoholic beverages
and the company&rsquo;s undertakings to reduce underage access and abuse of alcohol. From 1998 to 1999, prior to joining Diageo,
Mr. Smith was Special Advisor to President Clinton on The White House staff, where he served on the impeachment defense team. Mr.
Smith also served as an informal strategic communications advisor to President Clinton from the beginning of the Clinton Administration.
Mr. Smith has experience in public affairs with The Hawthorn Group, a Washington-based public affairs firm (1999 to 2000), and
his own firm, Smith Worldwide Inc., which focused on reputation and crisis management (1994 to 1996). He was Chief Operating Officer
of Hill &amp; Knowlton International Public Relations-New York from 1992 to 1993, where he consulted with the firm's largest consumer
product, technology and legal clients. Prior to that, Mr. Smith was Vice President of Corporate Affairs, the senior public affairs
and public relations officer, for Philip Morris Companies Inc. (now Altria) from 1975 to 1992. During his 17 years with Philip
Morris, Mr. Smith also led the Corporate Affairs departments of the Miller Brewing Company and The Seven-Up Company, both then
Philip Morris operating companies. Mr. Smith began his career as a reporter and assistant city editor for The Knoxville Journal.
He is currently chairman of the Barrier Island Trust, an environmental protection organization. He formerly sat on the Board of
Advisors of Mount Vernon, George Washington&rsquo;s home outside Washington, D.C. Mr. Smith also serves as an Honorary Battalion
Chief of the Fire Department of New York. Smith is author of the book &ldquo;If It&rsquo;s Not Impossible, it&rsquo;s Not Interesting.&rdquo;
He was selected to serve as a director in part due to his extensive experience with the alcoholic beverage business and other businesses
that rely on age verification, his work in government and public relations, his knowledge of the Company, including as a director
of Intelli-Check, Inc. prior to the merger with Mobilisa and his general business experience.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Executive Officers</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"> The following
table sets forth information regarding our executive officers as of January 7, 2015: </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; border-bottom: Black 1pt solid">Name</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Age</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Position with the Company<BR> and Principal Occupation</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Held Office<BR> Since</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 53%; text-align: left; text-indent: -10pt; padding-left: 10pt">Bill Roof</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: center">&nbsp;</TD><TD STYLE="width: 10%; text-align: center">60</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 20%; text-align: left">Chief Executive Officer</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: center">&nbsp;</TD><TD STYLE="width: 10%; text-align: center">2014</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Bill White</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">54</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">Chief Financial Officer, Secretary and Treasurer</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">2012</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Russell Embry</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">50</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">Chief Technology Officer</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">2001</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Robert N. Williamsen</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">51</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">Chief Revenue Officer</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">2014</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in; background-color: white">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>William H Roof, PhD</I> was
appointed Chief Executive Officer effective October 1, 2014. Dr. Roof previously served as the Company&rsquo;s Vice President
and Chief Operating Officer from August 11, 2014 to September 30, 2014, as well as the Company&rsquo;s Senior Vice President
and Chief Scientist from May 2009 to April 2011. From April 2011 to September 2014, he served as the Chief Technology Officer
of Tech Flow, Inc., a provider of information technology services to the government in business and process analysis,
program management, user interaction design, software development, systems O&amp;M and technology support services.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; background-color: white"><I>Bill White</I>
has more than 28 years of experience in financial management, operations and business development. Prior to joining Intellicheck
Mobilisa, he served 11 years as the Chief Financial Officer, Secretary and Treasurer of FocusMicro, Inc. (&ldquo;FM&rdquo;). As
co-founder of FM, Mr. White played an integral role in growing the business from the company's inception to over $36 million in
annual revenue in a five year period. Mr. White has broad domestic and international experience including managing rapid and significant
growth, import/export, implementing tough cost management initiatives, exploiting new growth opportunities, merger and acquisitions,
strategic planning, resource allocation, tax compliance and organization development. Prior to co-founding FM, he served 15 years
in various financial leadership positions in the government sector. Mr. White started his career in Public Accounting. Mr. White
holds a Bachelor of Arts in Business Administration from Washington State University, and is a Certified Fraud Examiner.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Russell T. Embry</I> has over 25 years'
experience in the software engineering field. Mr. Embry was appointed Chief Technology Officer in July 2001, and was Vice President
of Information Technology prior. As CTO for Intellicheck Mobilisa, Mr. Embry is the chief architect of the company's product line.
From January 1998 to July 1999, Mr. Embry was Lead Software Engineer with RTS Wireless developing paging systems. From April 1995
to January 1998, he served as Principal Engineer at GEC-Marconi Hazeltine Corporation developing high speed radios and Identification
Friend or Foe (IFF) systems. From August 1994 through April 1995, he was a staff software engineer at Periphonics Corporation developing
automated telephone answering systems. From September 1989 to August 1994, Mr. Embry served as Senior Software Engineer at MESC/Nav-Com
developing automated vehicle location systems and satellite telephone systems. From July 1985 through September 1989, he was a
software engineer at Grumman Aerospace developing software for automated Test Equipment products. Mr. Embry holds a B.S. in Computer
Science from Stony Brook University and an M.S. in Computer Science from Polytechnic University, Farmingdale.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Robert N. Williamsen</I> was appointed
Chief Revenue Officer on December 12, 2014. Mr. Williamsen has a successful record in commercial information technology sales,
business development and marketing across a number of markets and revenue models. Mr. Williamsen&rsquo;s experience in commercial
information technology sales and marketing includes several start-up and early stage companies including eight years with the Pyxis
Corporation, where he served as Western Area Vice President of Sales and Operations and worked with the management team through
a successful IPO and, later, an acquisition by Cardinal Health. Mr. Williamsen most recently, from 2006 to 2008 served as Vice
President of Sales for IntelliDOT Corporation (now Patient Safe Solutions), a provider of wireless, barcode point of care solutions
for the healthcare marketplace where he hired, trained and developed skilled, professional and highly effective revenue-generating
teams and from 2009 to 2014, Mr. Williamsen was the founder and CEO of Patient Education Systems, a provider of interactive patient
education delivered via a proprietary digital media platform. Mr. Williamsen graduated, with honors, from Michigan State University
with a B.S. in medical technology and later completed an executive leadership development program at Boston University&rsquo;s
School of Management.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; background-color: white">There are no family
relationships between any of our directors or executive officers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Codes of Business Conduct and Ethics</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We maintain a code of ethics that applies
to all Company employees including the Chief Executive Officer, Chief Financial Officer, Directors and other persons who perform
similar functions. Our Code of Business Conduct and Ethics is intended to be a codification of the business and ethical principles
which guide our Directors, Officers and Employees, to deter wrongdoing, to promote honest and ethical conduct, to avoid conflicts
of interest, and to foster full, fair, accurate, timely and understandable disclosures, compliance with applicable governmental
laws, rules and regulations, the prompt internal reporting of violations and accountability for adherence to this Code. The Code
of Business Conduct and Ethics is also available on our website at www.icmobil.com. To the extent permitted, we intend to post
on our web site any amendments to, or waivers from, our Code of Business Conduct and Ethics.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Board of Directors and Committees of the Board</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The current Chairman of the Board of Directors
is Michael D. Malone, who is an independent director under NYSE Amex listing standards. The roles of Chairman of the Board and
Chief Executive Officer are separate. The Board of Directors believes that the separation of the offices of the Chairman of the
Board and Chief Executive Officer allows the Company&rsquo;s Chief Executive Officer to focus primarily on the Company&rsquo;s
business strategy, operations and corporate vision. The Board of Directors consists of a majority of independent directors, and
each of the committees of the Board of Directors is comprised solely of independent directors. The Company does not have a policy
mandating an independent lead director. The independent directors meet at least annually in executive session without the presence
of non-independent directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Board of Directors has
established a compensation committee which is currently comprised of Mr. Smith, chairperson, Mr. Bedard, Mr. Malone and Mr.
Davis, each of whom is independent as defined in Section 803(A) of the NYSE MKT listing standards. The compensation committee
reviews and recommends to the board the compensation for all officers and directors of our company and reviews general policy
matters relating to the compensation and benefits of all employees. The compensation committee also administers the stock
option plans.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Board of Directors has established corporate
governance and nominating committee, which is comprised of Mr. Bedard, chairperson, Mr. Davis and Mr. Georges, each of whom is independent
as defined in Section 803(A) of the NYSE MKT listing standards. The corporate governance and nominating committee reviews our internal
policies and procedures and by-laws. With respect to nominating director candidates, this committee identifies and evaluates potential
director candidates and recommends candidates for appointment or election to the Board.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Board of Directors has a
separately designated audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of
1934, as amended (the &ldquo;Exchange Act&rdquo;), which is currently comprised of Mr. Malone, chairperson, Mr. Georges and
Mr. Smith. The members of the Audit Committee are independent as defined in Section 803(A) of the NYSE MKT listing standards
and Rule 10A-3(b)(1) under the Exchange Act (subject to the exemptions provided in Rule 10A-3(c) under the Exchange Act). The
audit committee recommends to the Board of Directors the annual engagement of a firm of independent accountants and reviews
with the independent accountants the scope and results of audits, our internal accounting controls and audit practices and
professional services rendered to us by our independent accountants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><A NAME="s1_15"></A>EXECUTIVE COMPENSATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Overview </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">This compensation discussion describes the
material elements of compensation awarded to, earned by, or paid to each of Intellicheck Mobilisa&rsquo;s executive officers who
served as named executive officers during the last completed fiscal year. This compensation discussion focuses on the information
contained in the following tables and related footnotes and narrative for primarily the last completed fiscal year, but also describes
compensation actions taken before or after the last completed fiscal year to the extent it enhances the understanding of Intellicheck
Mobilisa&rsquo;s executive compensation disclosure.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; border-top-width: 0in; border-top-color: Black; border-bottom-width: 0in; border-bottom-color: Black; border-left-width: 0in; border-left-color: Black">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Compensation Committee currently oversees
the design and administration of Intellicheck Mobilisa&rsquo;s executive compensation program and compensation for the Board of
Directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The principal elements of Intellicheck Mobilisa&rsquo;s
executive compensation program are base salary, annual cash incentives, and long-term equity incentives in the form of stock options
and other benefits. Intellicheck Mobilisa&rsquo;s other benefits consist of reimbursed business travel and entertainment expenses,
a vehicle allowance, health insurance benefits, vacation and sick pay, and a qualified 401(k) savings plan. Intellicheck Mobilisa&rsquo;s
philosophy is to position the aggregate of these elements at a level that is commensurate with Intellicheck Mobilisa&rsquo;s size
and performance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Compensation Program Objectives and
Philosophy</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>In General</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The objectives of Intellicheck Mobilisa&rsquo;s
compensation programs are to:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">attract, motivate and retain talented and dedicated
executive officers;</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">provide Intellicheck Mobilisa&rsquo;s executive officers
with both cash and equity incentives to further Intellicheck Mobilisa&rsquo;s interests and those of Intellicheck Mobilisa&rsquo;s
stockholders; and</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">provide employees with long-term incentives so Intellicheck
Mobilisa can retain them and provide stability during Intellicheck Mobilisa&rsquo;s growth stage.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; border-top-width: 0in; border-top-color: Black; border-bottom-width: 0in; border-bottom-color: Black; border-left-width: 0in; border-left-color: Black">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; border-top-width: 0in; border-top-color: Black; border-bottom-width: 0in; border-bottom-color: Black; border-left-width: 0in; border-left-color: Black">Generally,
the compensation of Intellicheck Mobilisa&rsquo;s executive officers is composed of a base salary, an annual incentive compensation
award and equity awards in the form of stock options. In setting base salaries, the Compensation Committee generally reviewed the
individual contributions of each executive. In addition, stock options are granted to provide the opportunity for long-term compensation
based upon the performance of Intellicheck Mobilisa&rsquo;s Common Stock over time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Intellicheck Mobilisa generally intends
to qualify executive compensation for deductibility without limitation under Section 162(m) of the Internal Revenue Code (the &ldquo;Code&rdquo;).
Section 162(m) provides that, for purposes of the regular income tax and the alternative minimum tax, the otherwise allowable deduction
for compensation paid or accrued with respect to a covered employee of a publicly-held corporation (other than certain exempt performance-based
compensation) is limited to no more than $1.0 million per year. The non-exempt compensation paid to any of our executive officers
for fiscal year 2013, as calculated for purposes of Section 162(m), did not exceed the $1.0 million limit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Competitive Marketplace for Talent</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Intellicheck Mobilisa defines its competitive
marketplace for executive talent and investment capital to be the technology and business services industries. To date, Intellicheck
Mobilisa has not engaged in the benchmarking of executive compensation but Intellicheck Mobilisa may choose to do so in the future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Compensation Process</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For each of Intellicheck Mobilisa&rsquo;s
named executive officers, the Compensation Committee reviews and approves all elements of compensation, taking into consideration
recommendations from Intellicheck Mobilisa&rsquo;s CEO (for compensation other than his own), as well as competitive marketplace
guidance. Based upon its review, the Compensation Committee approves salaries for executive officers. The Compensation Committee
sets the salary level of each executive officer on a case by case basis, taking into account the individual&rsquo;s level of responsibilities
and performance. All executive officer salaries are reviewed on an annual basis. Salary changes for executives are based primarily
on their performance in supporting the strategic initiatives of the Chief Executive Officer, economic and competitive factors,
meeting individual goals and objectives set by the Chief Executive Officer, and improving the operating efficiency of the Company.
Also, where applicable, changes in the duties and responsibilities of each other executive officer may be considered in deciding
on changes in annual salary.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Executive Officer Bonuses</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Board of Directors discontinued the
Executive Compensation Bonus Plan as of November, 2013. During 2013 no bonuses were paid under the Executive Compensation
Bonus Plan.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Stock Option Grants</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Compensation Committee currently administers
Intellicheck Mobilisa&rsquo;s stock option and equity incentive plans for executive officers, employees, consultants and outside
directors. Under the plans, the Compensation Committee grants options to purchase Common Stock with an exercise price of no less
than the fair market value of the Common Stock on the date of grant. The Compensation Committee believes that providing stock options
to the executive officers, who are responsible for Intellicheck Mobilisa&rsquo;s management and growth, gives them an opportunity
to own Intellicheck Mobilisa stock and better aligns their interests with the interests of the stockholders. It also promotes retention
of the officers because of the vesting provisions of the option grants and the potential for stock price appreciation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For these reasons, the Compensation Committee
considers stock options as an important element of compensation when it reviews executive officer compensation. At its discretion,
the Compensation Committee also grants options based on individual and corporate achievements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Normally, the Chief Executive Officer makes
a recommendation to the Compensation Committee for awards to be made to executive officers other than the Chief Executive Officer.
The Committee approves grants made to the Chief Executive Officer and other executive officers and, in certain cases, recommends
grants for approval by the entire Board. The Compensation Committee determines the number of shares underlying each stock option
grant based upon the executive officer&rsquo;s and Intellicheck Mobilisa&rsquo;s performance, the executive officer&rsquo;s role
and responsibilities at Intellicheck Mobilisa, and the executive officer&rsquo;s base salary.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Chief Executive Officer Compensation.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Dr. Roof was granted an option to purchase
16,250 shares of common stock at an exercise price of $5.68 per share on August 11, 2014, pursuant to his prior agreement as the
Company&rsquo;s Chief Operating Officer. In connection with becoming the Company&rsquo;s President and Chief Executive Officer,
Dr. Roof and the Company have entered into an employment agreement, effective October 1, 2014 (the &ldquo;Agreement&rdquo;). The
Agreement, which supersedes Dr. Roof&rsquo;s agreement as Chief Operating Officer, provides for a base salary of $250,000 per year.
The Agreement also provides for certain potential annual incentive compensation awards. For the remainder of 2014, Dr. Roof may
earn up to a maximum amount of $75,000 based on achievement of goals identified by the Board by November 4, 2014 (with a minimum
of $25,000, payable in 2015). For 2015, Dr. Roof may earn up to a maximum combined total value of 50% to 75% of his base salary
based on achievement of goals identified by the Board by the first quarter of 2015, which will take the form of a 50/50 split between
cash and equity. Dr. Roof was also, on his first day of employment as President and Chief Executive Officer, granted an option
to purchase 60,000 shares of the Company&rsquo;s common stock under the Company&rsquo;s 2006 Equity Incentive Plan. In addition,
Dr. Roof is entitled to receive benefits in accordance with the Company&rsquo;s existing benefit policies and is reimbursed for
Company expenses in accordance with the Company&rsquo;s expense reimbursement policies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Chief Financial Officer Compensation</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr. White receives a base salary of $194,250.
In addition, Mr. White is eligible to receive benefits in accordance with the Company&rsquo;s existing benefit policies and is
reimbursed for Company expenses in accordance with the Company&rsquo;s expense reimbursement policies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Chief Technology Officer Compensation</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr. Russell Embry receives a base salary
of $200,000. In addition, Mr. Embry is eligible to receive benefits in accordance with the Company&rsquo;s existing benefit policies
and is reimbursed for Company expenses in accordance with the Company&rsquo;s expense reimbursement policies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Chief Revenue Officer Compensation</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr. Robert Williamsen receives a base salary
of $225,000. In addition, Mr. Williamsen is eligible for certain quarterly incentive compensation and to receive benefits in accordance
with the Company&rsquo;s existing benefit policies and is reimbursed for Company expenses in accordance with the Company&rsquo;s
expense reimbursement policies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Severance and Change-in-Control Agreements </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"> On September 30, 2014, the CEO and
a Senior Vice President (collectively, the &ldquo;Executives&rdquo;), who were also board members, retired from the Company
and simultaneously resigned from the board of directors. In connection with the separation, the Company
entered into a separation and consulting agreement with the Executives.&nbsp;Included as part of the arrangement, the
Company committed to payments totaling $587,500 to be made over a period of 15 months. In exchange for the consideration, the
Executives agreed not to compete with the Company, solicit any employee, contractor or consultant of the Company to terminate
employment or contractual relationship with the Company, as well refrain from other activities, as defined in the agreement.
There is a renewal option contained in each agreement, which must be mutually agreed by for an additional nine month period
commencing on January 1, 2015 in exchange for monthly payments of $27,500. At September 30, 2014, the Company recorded the
future payments of the agreement as a liability and as a non-compete intangible asset totaling $587,500.&nbsp; The costs of
the non-compete will be amortized over the term of the agreement (15 months). There was no amortization expense
recognized for the three or nine months ended September 30, 2014. The Company made a lump sum payment
of $87,500 on October 1, 2014, will make a payment of $60,000 on January 15, 2015, and  is making 15 monthly payments of
$27,500 beginning on November 1, 2014 as a result of entering into the agreements with the Executives. </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On September 30, 2014, the Company entered
into a Severance Agreement with Bill White, the Company&rsquo;s Chief Financial Officer. Under the agreement, if Mr. White is terminated
for any reason other than cause, the Company would pay Mr. White one (1) year base salary in accordance with the Company&rsquo;s
regular payroll schedule. Mr. White would also be entitled to a gross amount equal to any quarterly bonus target applicable during
the quarter, accelerated vesting of all outstanding stock options and coverage of health benefits for a period of up to 12 months.
The agreement has a term of three years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Effective October 1, 2014, the Company entered
into an Executive Employment Agreement with Dr. William Roof, the Company&rsquo;s Chief Executive Officer. The agreement provides
for an annual base salary of $250,000. Under the agreement, if Dr. Roof is terminated for any reason other than cause, it would
pay Dr. Roof the greater as follows: (a) 12 months if the Separation Date occurs less than 24 months after commencement of Dr.
Roof&rsquo;s employment as Chief Executive Officer, and (b) 24 months if the Separation Date occurs 24 months or more after the
commencement of Dr. Roof&rsquo;s employment as Chief Executive Officer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Each of the agreements requires the executive
to devote substantially all his time and efforts to our business and contains non-competition and nondisclosure covenants of the
officer for the term of his employment and for a one year period thereafter. Each agreement provides that we may terminate the
agreement for cause.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; border-top-width: 0in; text-align: center; border-top-color: Black; border-bottom-width: 0in; border-bottom-color: Black"><FONT STYLE="font-weight: normal">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><U>INTELLICHECK MOBILISA SUMMARY COMPENSATION
TABLE</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; border-top-width: 0in; border-top-color: Black; border-bottom-width: 0in; border-bottom-color: Black; border-left-width: 0in; border-left-color: Black">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; border-top-width: 0in; border-top-color: Black; border-bottom-width: 0in; border-bottom-color: Black; border-left-width: 0in; border-left-color: Black"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; border-top-width: 0in; border-top-color: Black; border-bottom-width: 0in; border-bottom-color: Black; border-left-width: 0in; border-left-color: Black"> The
following table sets forth compensation paid to executive officers whose compensation was in excess of $100,000 for any of the
three fiscal years ended December 31, 2014. No other executive officers received total salary and bonus compensation in excess
of $100,000 during any of such fiscal years. </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; border-top-width: 0in; border-top-color: Black; border-bottom-width: 0in; border-bottom-color: Black; border-left-width: 0in; border-left-color: Black">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; border-top-width: 0in; border-top-color: Black; border-bottom-width: 0in; border-bottom-color: Black; border-left-width: 0in; border-left-color: Black"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid; text-align: left"> Name and Principal Position </TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"> Year </TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"> &nbsp; </TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"> Salary<BR>
    ($) </TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"> &nbsp; </TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"> &nbsp; </TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"> Bonus<BR>
    ($) </TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"> &nbsp; </TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"> &nbsp; </TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt"><B> Option </B></FONT> <BR>
    <FONT STYLE="font-size: 10pt"><B>Awards</B></FONT><BR> <FONT STYLE="font-size: 10pt"><B>($)<SUP>(1)</SUP></B></FONT> </TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"> &nbsp; </TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"> &nbsp; </TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt"><B> All
    Other </B></FONT> <BR> <FONT STYLE="font-size: 10pt"><B>Compensation</B></FONT><BR> <FONT STYLE="font-size: 10pt"><B>($)<SUP>(2)</SUP></B></FONT> </TD>
    <TD NOWRAP STYLE="font-size: 10pt; text-align: left"><SUP> &nbsp; </SUP></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"> &nbsp; </TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"> Total<BR>
    ($) </TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: center"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: right"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: right"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: right"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: right"> &nbsp; </TD>
    <TD NOWRAP STYLE="font-size: 10pt; text-align: left"><SUP> &nbsp; </SUP></TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: right"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt"> William H. Roof </FONT> <BR> <FONT STYLE="font-size: 10pt">Chief
    Executive Officer &amp; </FONT><BR> <FONT STYLE="font-size: 10pt">President<SUP>(3)</SUP></FONT> </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: center"> 2014 </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> 77,803 </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> &mdash; </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> 306,574 </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> 3,787 </TD>
    <TD NOWRAP STYLE="font-size: 10pt; text-align: left"></TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> 388,164 </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: center"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> &nbsp; </TD>
    <TD NOWRAP STYLE="font-size: 10pt; text-align: left"><SUP> &nbsp; </SUP></TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 31%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt"> Nelson Ludlow </FONT> <BR>
    <FONT STYLE="font-size: 10pt">Former Chief Executive Officer &amp;</FONT><BR> <FONT STYLE="font-size: 10pt">President</FONT><SUP>(3)</SUP> </TD><TD STYLE="width: 1%; font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="width: 10%; font-size: 10pt; text-align: center"> 2014 </TD><TD STYLE="width: 1%; font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="width: 8%; font-size: 10pt; text-align: right"> 194,750 </TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="width: 1%; font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="width: 8%; font-size: 10pt; text-align: right"> &nbsp;25,000 </TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="width: 1%; font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="width: 8%; font-size: 10pt; text-align: right"> &nbsp;&mdash; </TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="width: 1%; font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="width: 8%; font-size: 10pt; text-align: right"> 147,083 </TD>
    <TD NOWRAP STYLE="width: 2%; font-size: 10pt; text-align: left"><SUP> (5) </SUP></TD><TD STYLE="width: 1%; font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="width: 8%; font-size: 10pt; text-align: right"> 366,833 </TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt"> &nbsp; </TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt"> 2013 </TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"> &nbsp; </TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right"> 246,000 </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"> &nbsp; </TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right"> &mdash; </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"> &nbsp; </TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right"> &mdash; </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"> &nbsp; </TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right"> &mdash; </TD>
    <TD NOWRAP STYLE="font-size: 10pt; padding-bottom: 1pt; text-align: left"><SUP> &nbsp; </SUP></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"> &nbsp; </TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right"> 246,000 </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: center"> 2012 </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> 227,667 </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> 10,000 </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> &mdash; </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> &mdash; </TD>
    <TD NOWRAP STYLE="font-size: 10pt; text-align: left"><SUP> &nbsp; </SUP></TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> 237,667 </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left"> Russell T. Embry<BR> Chief Technology Officer </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: center"> 2014 </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> 190,875 </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp; </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> &nbsp; </TD>
    <TD NOWRAP STYLE="font-size: 10pt; text-align: left"><SUP> &nbsp; </SUP></TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> 190,875 </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt"> &nbsp; </TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt"> 2013 </TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"> &nbsp; </TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right"> 185,400 </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"> &nbsp; </TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right"> &mdash; </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"> &nbsp; </TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right"> 7,250 </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"> &nbsp; </TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right"> 2,781 </TD>
    <TD NOWRAP STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt"><SUP> (6) </SUP></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"> &nbsp; </TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right"> 195,431 </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: center"> 2012 </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> 185,400 </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> 5,000 </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> &mdash; </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> 2,781 </TD>
    <TD NOWRAP STYLE="font-size: 10pt; text-align: left"><SUP> (6) </SUP></TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> 193,181 </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt"> Bonnie Ludlow </FONT> <BR>
    <FONT STYLE="font-size: 10pt">Senior Vice President<SUP>(7)</SUP></FONT> </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: center"> 2014 </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> 98,958 </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> &nbsp;23,510 </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> 65,966 </TD>
    <TD NOWRAP STYLE="font-size: 10pt; text-align: left"><SUP> (8) </SUP></TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> 188,434 </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt"> &nbsp; </TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt"> 2013 </TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"> &nbsp; </TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right"> 124,999 </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"> &nbsp; </TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right"> &mdash; </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"> &nbsp; </TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right"> &mdash; </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"> &nbsp; </TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right"> &mdash; </TD>
    <TD NOWRAP STYLE="font-size: 10pt; padding-bottom: 1pt; text-align: left"><SUP> &nbsp; </SUP></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"> &nbsp; </TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right"> 124,999 </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: center"> 2012 </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> 67,708 </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> 5,000 </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> &mdash; </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> &mdash; </TD>
    <TD NOWRAP STYLE="font-size: 10pt; text-align: left"><SUP> &nbsp; </SUP></TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> 72,708 </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: center"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> &nbsp; </TD>
    <TD NOWRAP STYLE="font-size: 10pt; text-align: left"><SUP> &nbsp; </SUP></TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left"> Bill White<BR> Chief Financial Officer </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: center"> 2014 </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> 188,469 </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> &nbsp;10,000 </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> 1,236 </TD>
    <TD NOWRAP STYLE="font-size: 10pt; text-align: left"><SUP> &nbsp; </SUP></TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> 199,705 </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt"> &nbsp; </TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt"> 2013 </TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"> &nbsp; </TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right"> 185,000 </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"> &nbsp; </TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right"> &mdash; </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"> &nbsp; </TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right"> 7,250 </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"> &nbsp; </TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right"> &mdash; </TD>
    <TD NOWRAP STYLE="font-size: 10pt; padding-bottom: 1pt; text-align: left"><SUP> &nbsp; </SUP></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"> &nbsp; </TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right"> 192,250 </TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: center"> 2012 </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> 131,042 </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> 2,500 </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> &mdash; </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> 3,238 </TD>
    <TD NOWRAP STYLE="font-size: 10pt; text-align: left"><SUP> (6) </SUP></TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> 136,780 </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt"> Robert N. Williamsen </FONT> <BR> <FONT STYLE="font-size: 10pt">Chief
    Revenue Officer<SUP>(9)</SUP></FONT> </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: center"> 2014 </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> &nbsp;1,705 </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> &nbsp;&nbsp; </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> &nbsp;231,252 </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> &nbsp; </TD>
    <TD NOWRAP STYLE="font-size: 10pt; text-align: left"><SUP> &nbsp; </SUP></TD><TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD><TD STYLE="font-size: 10pt; text-align: right"> &nbsp;232,957 </TD><TD STYLE="font-size: 10pt; text-align: left"> &nbsp; </TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; border-top-width: 0in; border-top-color: Black; border-bottom-width: 0in; border-bottom-color: Black; border-left-width: 0in; border-left-color: Black"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; border-top-width: 0in; border-top-color: Black; border-bottom-width: 0in; border-bottom-color: Black; border-left-width: 0in; border-left-color: Black">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; border-top-width: 0in; border-top-color: Black; border-bottom-width: 0in; border-bottom-color: Black; border-left-width: 0in; border-left-color: Black"> &nbsp; </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; border-top-width: 0in; border-top-color: Black; border-bottom-width: 0in; border-bottom-color: Black; border-left-width: 0in; border-left-color: Black"></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;____________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; border-top-width: 0in; border-top-color: Black; border-bottom-width: 0in; border-bottom-color: Black; border-left-width: 0in; border-left-color: Black"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"> (1) </FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif"> The amounts reported in the &ldquo;Option Awards&rdquo; column
    reflect the aggregate grant date fair value of awards for the years ended December 31, 2014, 2013, and 2012 computed in accordance
    with FASB ASC Topic 718. See Note 11 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K,
    filed in this report, for information regarding assumptions underlying the valuation of equity awards. </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif"> (2) </FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif"> No other compensation in excess of $10,000, including perquisites,
was paid to any of Intellicheck Mobilisa&rsquo;s named executive officers. </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif"> (3) </FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif"> Dr. Roof was named Chief Operating Officer on August 11, 2014
    and became Chief Executive Officer on October 1, 2014. Dr. Roof&rsquo;s annual salary is $250,000. </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif"> (4) </FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif"> Dr. Ludlow resigned effective September 30, 2014. </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif"> (5) </FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif"> Includes certain severance and consulting payments made to
Dr. Ludlow in 2014. </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif"> (6) </FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif"> Represents matching contribution under the Company&rsquo;s 401(K)
    Plan. </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif"> (7) </FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif"> Ms. Ludlow resigned effective September 30, 2014. </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif"> (8) </FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif"> Includes certain severance and consulting payments made to
    Ms. Ludlow in 2014. </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif"> (9) </FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif"> Mr. Williamsen was named Chief Revenue Officer on December 12,
2014. Mr. Williamsen&rsquo;s annual salary is $225,000. </FONT></TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; border-top-width: 0in; border-top-color: Black; border-bottom-width: 0in; border-bottom-color: Black; border-left-width: 0in; border-left-color: Black"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; border-top-width: 0in; border-top-color: Black; border-bottom-width: 0in; border-bottom-color: Black; border-left-width: 0in; border-left-color: Black">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Stock Option and Equity Incentive
Plans</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-weight: normal">The principal
purpose of the Stock Option and Equity Incentive Plans is to attract, motivate, reward and retain selected employees, consultants
and directors through the granting of stock-based compensation awards. The Plans provide for a variety of awards, including non-qualified
stock options, incentive stock options (within the meaning of Section 422 of the Code), stock appreciation rights, restricted stock
awards, performance-based awards and other stock-based awards. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; border-top-width: 0in; border-top-color: Black; border-bottom-width: 0in; border-bottom-color: Black; border-left-width: 0in; border-left-color: Black">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; border-top-width: 0in; border-top-color: Black; border-bottom-width: 0in; border-bottom-color: Black; border-left-width: 0in; border-left-color: Black">The
Company adopted several Stock Option Plans from 1998 through 2004 (and an amendment to the 2004 plan in 2006 pursuant to which
the plan was renamed the &ldquo;2006 Equity Incentive Plan&rdquo; and amended to provide for the issuance of other types of equity
incentives such as restricted stock grants) (collectively, the &ldquo;Plans&rdquo;) covering up to 781,250 of the Company&rsquo;s
common shares, pursuant to which officers, directors, key employees and consultants to the Company are eligible to receive incentive
stock options and nonqualified stock options. The Compensation Committee of the Board of Directors administers these Plans and
determines the terms and conditions of options granted, including the exercise price. These Plans generally provide that all stock
options will expire within ten years of the date of grant. Incentive stock options granted under these Plans must be granted at
an exercise price that is not less than the fair market value per share at the date of the grant and the exercise price must not
be less than 110% of the fair market value per share at the date of the grant for grants to persons owning more than 10% of the
voting stock of the Company. These Plans also entitle non-employee directors to receive grants of non-qualified stock options as
approved by the Board of Directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Administration.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Plans are currently administered by
the Compensation Committee as designated by the Board of Directors. The Compensation Committee has the power to interpret the Plans
and to adopt rules for the administration, interpretation and application according to terms of the Plans.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Grant of Awards; Shares Available for Awards.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Certain employees, consultants and directors
are eligible to be granted awards under the Plans. The Compensation Committee will determine who will receive awards under the
Plans, as well as the form of the awards, the number of shares underlying the awards, and the terms and conditions of the awards
consistent with the terms of the Plans.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">A total of 76,291 shares of Intellicheck
Mobilisa&rsquo;s Common Stock are available for issuance or delivery under the existing Plans. The number of shares of the Company&rsquo;s
Common Stock issued or reserved pursuant to the Plans will be adjusted at the discretion of the Board of Directors or the Compensation
Committee as a result of stock splits, stock dividends and similar changes in the Company&rsquo;s Common Stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Stock Options.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Plans permit the Compensation Committee
to grant participants incentive stock options, which qualify for special tax treatment in the United States, as well as non-qualified
stock options. The Compensation Committee will establish the duration of each option at the time it is granted, with maximum ten-year
duration for incentive stock options, and may also establish vesting and performance requirements that must be met prior to the
exercise of options. Stock option grants (other than incentive stock option grants) also may have exercise prices that are less
than, equal to or greater than the fair market value of the Company&rsquo;s Common Stock on the date of grant. Incentive stock
options must have an exercise price that is at least equal to the fair market value of the Company&rsquo;s Common Stock on the
date of grant. Stock option grants may include provisions that permit the option holder to exercise all or part of the holder&rsquo;s
vested options, or to satisfy withholding tax liabilities, by tendering shares of the Company&rsquo;s Common Stock already owned
by the option holder for at least six months (or another period consistent with the applicable accounting rules) with a fair market
value equal to the exercise price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Other Equity-Based Awards</I>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition to stock options, the Compensation
Committee may also grant certain employees, consultants and directors shares of restricted stock, with terms and conditions as
the Compensation Committee may, pursuant to the terms of the 2006 Plan, establish. The 2006 Plan does not allow awards to be made
under terms and conditions which would cause such awards to be treated as deferred compensation subject to the rules of Section
409A of the Code.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Change-in-Control Provisions.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In connection with the grant of an award,
the Compensation Committee may provide that, in the event of a change in control, any outstanding awards that are unexercisable
or otherwise unvested will become fully vested and immediately exercisable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Amendment and Termination.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Compensation Committee may adopt, amend
and rescind rules relating to the administration of the Plans, and amend, suspend or terminate the Plans, but no amendment will
be made that adversely affects in a material manner any rights of the holder of any award without the holder&rsquo;s consent, other
than amendments that are necessary to permit the granting of awards in compliance with applicable laws. Intellicheck Mobilisa attempted
to structure the Plans so that remuneration attributable to stock options and other awards will not be subject to a deduction limitation
contained in Section 162(m) of the Code.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table summarizes options and
restricted stock units granted during the years 2013 and 2014, as of the date of this prospectus, to the named executive officers
and directors, in post-split shares:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>GRANTS OF PLAN-BASED AWARDS TABLE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 97%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; border-bottom: Black 1pt solid">Name</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Grant<BR> Date</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Approval<BR> Date</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Number of<BR> Securities<BR> Underlying<BR> Grant</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Exercise<BR> or<BR> Base<BR> Price<BR> of Option<BR> Awards<BR> ($/Sh)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 10pt"><b>Fair</b></font><br> <font style="font-size: 10pt"><b>Value</b></font><br> <font style="font-size: 10pt"><b>at Grant</b></font><br> <font style="font-size: 10pt"><b>Date</b></font><br> <font style="font-size: 10pt"><b>($)<sup>(1)</sup></b></font></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Expiration<BR> Date</TD>
    <TD STYLE="text-align: left; vertical-align: top"><SUP>&nbsp;</SUP></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 29%; text-align: left">Russell T. Embry</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: center">3/28/2013</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: center">3/28/2013</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">3,125</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">3.12</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">7,250</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right">3/28/2018</TD>
    <TD STYLE="width: 2%; text-align: left; vertical-align: top"><SUP>&nbsp;</SUP></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Bill White</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">3/28/2013</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">3/28/2013</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,125</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.12</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,250</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: right">3/28/2018</TD>
    <TD STYLE="text-align: left; vertical-align: top"><SUP>&nbsp;</SUP></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">William H. Roof</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">8/11/2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">7/25/2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">16,250</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5.68</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">84,574</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: right">8/11/2019</TD>
    <TD STYLE="text-align: left; vertical-align: top"><SUP>&nbsp;</SUP></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">William H. Roof</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">10/1/2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">7/25/2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">60,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4.04</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">222,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: right">10/1/2019</TD>
    <TD STYLE="text-align: left; vertical-align: top"><SUP>&nbsp;</SUP></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Emil R. Bedard</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">9/30/2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">8/5/2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,817</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.93</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">15,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><SUP></SUP></TD>
    <TD STYLE="text-align: left; vertical-align: top"><SUP>(2)</SUP></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Emil R. Bedard</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">9/30/2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">8/5/2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,634</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.93</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">30,001</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><SUP></SUP></TD>
    <TD STYLE="text-align: left; vertical-align: top"><SUP>(3)</SUP></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Jack A. Davis</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">9/30/2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">8/5/2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,272</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.93</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,999</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><SUP></SUP></TD>
    <TD STYLE="text-align: left; vertical-align: top"><SUP>(4)</SUP></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">William P. Georges</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">9/30/2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">8/5/2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,272</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.93</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,999</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><SUP></SUP></TD>
    <TD STYLE="text-align: left; vertical-align: top"><SUP>(5)</SUP></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Michael D. Malone</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">9/30/2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">8/5/2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,178</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.93</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">40,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><SUP></SUP></TD>
    <TD STYLE="text-align: left; vertical-align: top"><SUP>(6)</SUP></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Michael D. Malone</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">9/30/2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">8/5/2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,178</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.93</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">40,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><SUP></SUP></TD>
    <TD STYLE="text-align: left; vertical-align: top"><SUP>(6)</SUP></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Guy L. Smith</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">9/30/2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">8/5/2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">16,423</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.93</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">45,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: right">9/30/2019<SUP></SUP></TD>
    <TD STYLE="text-align: left; vertical-align: top"><SUP>(7)</SUP></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Guy L. Smith</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">9/30/2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">8/5/2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,949</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.93</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">30,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">9/30/2019<sup></sup></font></TD>
    <TD STYLE="text-align: left; vertical-align: top"><SUP>(7)</SUP></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Robert N. Williamsen</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">12/18/2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">12/18/2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">100,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.09</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">231,252</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">12/18/2019<sup></sup></font></TD>
    <TD STYLE="text-align: left; vertical-align: top"><SUP>&nbsp;</SUP></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.1in; text-indent: 0.7pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>The grant date fair value of each equity award has been computed in accordance with ASC 718.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(2)</TD><TD>The grant date fair value of each equity award has been computed in accordance with ASC 718. Restricted shares shall vest and
shares of stock shall be issued on January 31, 2015.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(3)</TD><TD>The grant date fair value of each equity award has been computed in accordance with ASC 718. Restricted shares shall vest and
shares of stock shall be issued on January 31, 2016.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(4)</TD><TD>The grant date fair value of each equity award has been computed in accordance with ASC 718. Restricted shares shall vest and
shares of stock shall be issued on October 31, 2014.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(5)</TD><TD>The grant date fair value of each equity award has been computed in accordance with ASC 718. Restricted shares shall vestand
shares of stock shall be issued on October 31, 2014.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(6)</TD><TD>The grant date fair value of each equity award has been computed in accordance with ASC 718. Restricted shares shall vest and
shares of stock shall be issued on January 15, 2015.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(7)</TD><TD>Options fully vested October 31, 2014.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 10pt; text-indent: 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 10pt; text-indent: 15pt"> The following table summarizes
unexercised options as of December 31, 2014 for the named executive officers: </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 10pt; text-indent: 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>OUTSTANDING EQUITY AWARDS AT FISCAL YEAR
END TABLE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 10pt; text-indent: 15pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP> &nbsp; </TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"> &nbsp; </TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"> No. of Securities<BR>
    Underlying Unexercised<BR> Options/Warrants </TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"> &nbsp; </TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"> &nbsp; </TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"> Option </TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"> &nbsp; </TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"> &nbsp; </TD>
    <TD NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"> Option </TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; border-bottom: Black 1pt solid"> Name </TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"> &nbsp; </TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"> Exercisable </TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"> &nbsp; </TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"> &nbsp; </TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"> Unexercisable </TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"> &nbsp; </TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"> &nbsp; </TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"> Exercise<BR> Price
    ($) </TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"> &nbsp; </TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"> &nbsp; </TD>
    <TD NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"> Expiration<BR> Date </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 48%; text-align: left"> Nelson Ludlow </TD><TD STYLE="width: 1%"> &nbsp; </TD>
    <TD STYLE="width: 1%; text-align: left"> &nbsp; </TD><TD STYLE="width: 10%; text-align: right"> 3,125 </TD><TD STYLE="width: 1%; text-align: left"> &nbsp; </TD><TD STYLE="width: 1%"> &nbsp; </TD>
    <TD STYLE="width: 1%; text-align: left"> &nbsp; </TD><TD STYLE="width: 10%; text-align: right"> &mdash; </TD><TD NOWRAP STYLE="width: 1%; text-align: left"> &nbsp; </TD><TD STYLE="width: 1%"> &nbsp; </TD>
    <TD STYLE="width: 1%; text-align: left"> &nbsp; </TD><TD STYLE="width: 10%; text-align: right"> 29.04 </TD><TD STYLE="width: 1%; text-align: left"> &nbsp; </TD><TD STYLE="width: 1%"> &nbsp; </TD>
    <TD STYLE="width: 12%; text-align: center"> 03/20/18 </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"> Russell T. Embry </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> &nbsp; </TD><TD STYLE="text-align: right"> 4,375 </TD><TD STYLE="text-align: left"> &nbsp; </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> &nbsp; </TD><TD STYLE="text-align: right"> &nbsp; </TD><TD NOWRAP STYLE="text-align: left"> &nbsp; </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> &nbsp; </TD><TD STYLE="text-align: right"> 11.60 </TD><TD STYLE="text-align: left"> &nbsp; </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: center"> 06/02/15 </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD> Russell T. Embry </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> &nbsp; </TD><TD STYLE="text-align: right"> 782 </TD><TD STYLE="text-align: left"> &nbsp; </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> &nbsp; </TD><TD STYLE="text-align: right"> 2,343 </TD><TD NOWRAP STYLE="text-align: left"><SUP> (1) </SUP></TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> &nbsp; </TD><TD STYLE="text-align: right"> 3.12 </TD><TD STYLE="text-align: left"> &nbsp; </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: center"> 03/28/18 </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"> Bill White </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> &nbsp; </TD><TD STYLE="text-align: right"> 782 </TD><TD STYLE="text-align: left"> &nbsp; </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> &nbsp; </TD><TD STYLE="text-align: right"> 2,343 </TD><TD NOWRAP STYLE="text-align: left"><SUP> (1) </SUP></TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> &nbsp; </TD><TD STYLE="text-align: right"> 3.12 </TD><TD STYLE="text-align: left"> &nbsp; </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: center"> 03/28/18 </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left"> William H. Roof </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> &nbsp; </TD><TD STYLE="text-align: right"> 0 </TD><TD STYLE="text-align: left"> &nbsp; </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> &nbsp; </TD><TD STYLE="text-align: right"> 16,250 </TD><TD NOWRAP STYLE="text-align: left"> &nbsp; </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> &nbsp; </TD><TD STYLE="text-align: right"> 5.68 </TD><TD STYLE="text-align: left"> &nbsp; </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: center"> 8/11/2019 </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"> William H. Roof </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> &nbsp; </TD><TD STYLE="text-align: right"> 0 </TD><TD STYLE="text-align: left"> &nbsp; </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> &nbsp; </TD><TD STYLE="text-align: right"> 60,000 </TD><TD NOWRAP STYLE="text-align: left"> &nbsp; </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> &nbsp; </TD><TD STYLE="text-align: right"> 4.04 </TD><TD STYLE="text-align: left"> &nbsp; </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: center"> 10/1/2019 </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left"> Robert N. Williamson </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> &nbsp; </TD><TD STYLE="text-align: right"> 0 </TD><TD STYLE="text-align: left"> &nbsp; </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> &nbsp; </TD><TD STYLE="text-align: right"> 100,000 </TD><TD NOWRAP STYLE="text-align: left"> &nbsp; </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> &nbsp; </TD><TD STYLE="text-align: right"> 3.09 </TD><TD STYLE="text-align: left"> &nbsp; </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: center"> 12/18/2019 </TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.1in; text-indent: 0.7pt">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>



<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>These shares vest 25% per year on the anniversary of the date of grant beginning March 28, 2013.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7pt; text-align: center">OPTION EXERCISES AND STOCK
VESTED TABLE</P>

<P STYLE="margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD NOWRAP STYLE="font-weight: bold; text-decoration: underline; padding-bottom: 1pt; text-align: center"></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Stock Options</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Stock Awards</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD NOWRAP STYLE="font-weight: bold; border-bottom: Black 1pt solid; text-align: left; vertical-align: bottom">Name</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>No. of <BR>
Shares</B></FONT><BR> <FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Acquired</B></FONT><BR> <FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Upon <BR>
Exercise</B></FONT><BR> <FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>(#)</B></FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Value</B></FONT><BR> <FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Received</B></FONT><BR> <FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Upon <BR>
Exercise</B></FONT><BR> <FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>($)<SUP>(1)</SUP></B></FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>No. of Shares</B></FONT><BR> <FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Acquired <BR>
Upon</B></FONT><BR> <FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Vesting (#)</B></FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Value <BR>
Received</B></FONT><BR> <FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Upon Vesting <BR>
($)</B></FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 48%">&mdash;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 1%"></TD><TD STYLE="text-align: right; width: 10%">&mdash;</TD><TD STYLE="text-align: left; width: 1%">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 1%"></TD><TD STYLE="text-align: right; width: 10%">&mdash;</TD><TD STYLE="text-align: left; width: 1%">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 1%"></TD><TD STYLE="text-align: right; width: 10%">&mdash;</TD><TD STYLE="text-align: left; width: 1%">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 1%"></TD><TD STYLE="text-align: right; width: 10%">&mdash;</TD><TD STYLE="text-align: left; width: 1%">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"> No officers named in the Summary Compensation
Table exercised stock options or received shares from vested or unrestricted awards during fiscal year 2014. </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Pension Benefits</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-weight: normal">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We do not sponsor any
qualified or non-qualified defined benefit plans.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Non-qualified Deferred Compensation</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-weight: normal">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Intellicheck Mobilisa does not maintain
any non-qualified defined contribution or deferred compensation plans. The Compensation Committee, which is comprised solely of
&ldquo;outside directors&rdquo; as defined for purposes of Section 162(m) of the Code, may elect to provide Intellicheck Mobilisa&rsquo;s
officers and other employees with non-qualified defined contribution or deferred compensation benefits if the Compensation Committee
determines that doing so is in the company&rsquo;s best interests. Intellicheck Mobilisa sponsors a tax qualified defined contribution
401(k) plan in which Mr. Embry and Mr. White participated in 2013. Intellicheck Mobilisa made a matching contribution to the plan
equal to 50% of the first 6% an employee contributes into the plan.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B> Compensation of Directors </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; border-top-width: 0in; border-top-color: Black; border-bottom-width: 0in; border-bottom-color: Black; border-left-width: 0in; border-left-color: Black"> The
table below sets forth certain information concerning compensation of Intellicheck Mobilisa&rsquo;s directors who served in 2014. </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; border-top-width: 0in; border-top-color: Black; border-bottom-width: 0in; border-bottom-color: Black; border-left-width: 0in; border-left-color: Black">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt"><B> Name and Principal Position </B></FONT></td>
    <TD STYLE="text-align: center"> &nbsp; </td>
    <TD COLSPAN="3" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B> Fees Paid </B></FONT> <br>
    <FONT STYLE="font-size: 10pt"><B>in Cash</B></FONT><br>
    <FONT STYLE="font-size: 10pt"><B>($)</B></FONT> </td>
    <TD STYLE="text-align: center"> &nbsp; </td>
    <TD COLSPAN="3" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B> Option </B></FONT> <br>
    <FONT STYLE="font-size: 10pt"><B>Awards</B></FONT><br>
    <FONT STYLE="font-size: 10pt"><B>($)<SUP>(1)</SUP></B></FONT> </td>
    <TD STYLE="text-align: center"> &nbsp; </td>
    <TD COLSPAN="3" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B> Stock </B></FONT> <br>
    <FONT STYLE="font-size: 10pt"><B>Awards</B></FONT><br>
    <FONT STYLE="font-size: 10pt"><B>($)<SUP>(1)</SUP></B></FONT> </td>
    <TD STYLE="text-align: center"> &nbsp; </td>
    <TD COLSPAN="3" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B> All Other </B></FONT> <br>
    <FONT STYLE="font-size: 10pt"><B>Compensation</B></FONT><br>
    <FONT STYLE="font-size: 10pt"><B>($)<SUP>(4)</SUP></B></FONT> </td>
    <TD STYLE="text-align: center"> &nbsp; </td>
    <TD COLSPAN="3" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B> Total </B></FONT> <br>
    <FONT STYLE="font-size: 10pt"><B>($)</B></FONT> </td></tr>
<TR STYLE="background-color: rgb(204,238,255)">
    <TD STYLE="width: 35%"><FONT STYLE="font-size: 10pt"> Nelson Ludlow, Director<SUP>(2)</SUP> </FONT></td>
    <TD STYLE="vertical-align: bottom; text-align: center; width: 1%"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; width: 1%"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right; width: 10%"><FONT STYLE="font-size: 10pt"> &mdash; </FONT></td>
    <TD NOWRAP STYLE="vertical-align: bottom; width: 1%"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: center; width: 1%"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; width: 1%"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right; width: 10%"><FONT STYLE="font-size: 10pt"> &mdash; </FONT></td>
    <TD NOWRAP STYLE="vertical-align: bottom; width: 1%"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: center; width: 1%"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; width: 1%"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right; width: 10%"><FONT STYLE="font-size: 10pt"> &mdash; </FONT></td>
    <TD NOWRAP STYLE="vertical-align: bottom; width: 1%"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: center; width: 1%"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; width: 1%"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right; width: 10%"><FONT STYLE="font-size: 10pt"> &mdash; </FONT></td>
    <TD NOWRAP STYLE="vertical-align: bottom; width: 1%"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: center; width: 1%"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; width: 1%"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right; width: 10%"><FONT STYLE="font-size: 10pt"> &mdash; </FONT></td>
    <TD NOWRAP STYLE="vertical-align: bottom; width: 1%"> &nbsp; </td></tr>
<TR STYLE="background-color: White">
    <TD><FONT STYLE="font-size: 10pt"> General Emil Bedard, Director </FONT></td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"> 15,000 </td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt"> &mdash; </FONT></td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt"> 45,002 </FONT></td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt"> 15,000 </FONT></td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"> 75,002 </td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td></tr>
<TR STYLE="background-color: rgb(204,238,255)">
    <TD><FONT STYLE="font-size: 10pt"> Bonnie Ludlow, Director </FONT></td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt"> &mdash; </FONT></td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt"> &mdash; </FONT></td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt"> &mdash; </FONT></td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt"> &mdash; </FONT></td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt"> &mdash; </FONT></td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td></tr>
<TR STYLE="background-color: White">
    <TD><FONT STYLE="font-size: 10pt"> Guy L. Smith, Director<SUP>(3)</SUP> </FONT></td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt"> &mdash; </FONT></td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt"> 75,000 </FONT></td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt"> &mdash; </FONT></td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt"> &mdash; </FONT></td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt"> 75,000 </FONT></td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td></tr>
<TR STYLE="background-color: rgb(204,238,255)">
    <TD><FONT STYLE="font-size: 10pt"> Woody M. McGee, Director </FONT></td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"> &nbsp; </td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt"> &mdash; </FONT></td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt"> &mdash; </FONT></td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt"> &mdash; </FONT></td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"> &nbsp; </td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td></tr>
<TR STYLE="background-color: White">
    <TD><FONT STYLE="font-size: 10pt"> Michael D. Malone, Chairman </FONT></td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"> 33,333 </td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt"> &mdash; </FONT></td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt"> 80,000 </FONT></td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt"> &mdash; </FONT></td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"> 113,333 </td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td></tr>
<TR STYLE="background-color: rgb(204,238,255)">
    <TD><FONT STYLE="font-size: 10pt"> Willam P. Georges </FONT></td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"> &nbsp;2,500 </td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"> &nbsp; </td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"> &nbsp;4,999 </td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"> &nbsp; </td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"> 7,499 </td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td></tr>
<TR STYLE="background-color: White">
    <TD><FONT STYLE="font-size: 10pt"> Jack A. Davis </FONT></td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"> 2,500 </td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"> &nbsp; </td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"> &nbsp;4,999 </td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"> &nbsp; </td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: center"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom"> &nbsp; </td>
    <TD STYLE="vertical-align: bottom; text-align: right"> 7,499 </td>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.3pt 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">
<tr style="vertical-align: top">
    <TD STYLE="width: 0"> &nbsp; </td>
    <TD STYLE="width: 0.25in"><FONT STYLE="font-size: 10pt"> (1) </FONT></td>
    <TD><FONT STYLE="font-size: 10pt"> The amounts reported in the &ldquo;Option Awards&rdquo; and &ldquo;Stock Awards&rdquo;
    columns reflect the aggregate grant date fair value of awards computed in accordance with FASB ASC Topic 718. See Note 10
    of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K, filed in this report, for information
    regarding assumptions underlying the valuation of equity awards. </FONT></td></tr>
<tr style="vertical-align: top">
    <TD> &nbsp; </td>
    <TD><FONT STYLE="font-size: 10pt"> (2) </FONT></td>
    <TD><FONT STYLE="font-size: 10pt"> Dr. Ludlow resigned effective September 30, 2014.&nbsp;&nbsp;As of December 31, 2014,
    Mr. Ludlow had aggregate outstanding options to purchase 3,125 shares of common stock. </FONT></td></tr>
<tr style="vertical-align: top">
    <TD> &nbsp; </td>
    <TD><FONT STYLE="font-size: 10pt"> (3) </FONT></td>
    <TD><FONT STYLE="font-size: 10pt"> As of December 31, 2014, Mr. Smith had aggregate outstanding options to purchase 37,603
    shares     of common stock. </FONT></td></tr>
<tr style="vertical-align: top">
    <TD> &nbsp; </td>
    <TD><FONT STYLE="font-size: 10pt"> (4) </FONT></td>
    <TD><FONT STYLE="font-size: 10pt"> No other compensation, including perquisites in excess of $10,000, was paid to any of
    the directors. </FONT></td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Company reimburses directors for reasonable
out-of-pocket expenses incurred in connection with attendance at board meetings.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Effective July 1, 2011, all directors receive
the following annual compensation: the Chairman of the Board $80,000; other non-employee and employee directors $60,000. The amounts
are payable quarterly. In 2013, directors waived the majority of their fees to assist with the Company&rsquo;s cash management.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="s1_16"></A><B>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Governance Committee reviews transactions
with firms associated with directors and nominees for director. Intellicheck Mobilisa&rsquo;s management also monitors such transactions
on an ongoing basis. Executive officers and directors are governed by Intellicheck Mobilisa&rsquo;s Code of Business Conduct and
Ethics which provides that waivers may only be granted by the Board of Directors and must be promptly disclosed to stockholders.
No such waivers were granted nor applied for in 2013. Intellicheck Mobilisa&rsquo;s Corporate Governance Guidelines require that
all directors recuse themselves from any discussion or decision affecting their personal, business or professional interests.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Company entered into a 10-year lease
for the office space ending in 2017. Mobilisa leases office space from Eagle Coast, LLC, an entity that is wholly-owned by Dr.
Nelson Ludlow, our former Chief Executive Officer and a former director, and Mrs. Bonnie Ludlow, our former Senior Vice President
and one of our former directors, both of whom currently serve as consultants to the Company. For the years ended December 31, 2013
and 2012, total rent payments for this office space were $92,046 and $91,780.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As described above, in September 2014, the
Company entered into a separation and consulting agreement with Dr. Nelson Ludlow, our former Chief Executive Officer and a former
director, and Mrs. Bonnie Ludlow, our former Senior Vice President and one of our former directors.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><A NAME="s1_17"></A>PRINCIPAL STOCKHOLDERS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"> The following table sets forth information
with respect to the beneficial ownership of shares of our common stock by our directors, the individuals named in the Summary
Compensation Table, all directors and executive officers as a group and beneficial owners of more than 5% of our common stock
as of January 7, 2015 and as adjusted to reflect the shares of common stock to be issued and sold in the offering, assuming no
exercise of the underwriter&rsquo;s option to purchase additional shares. </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"> We have determined beneficial ownership
of securities in accordance with the rules of the SEC. Under these rules, the number of shares of common stock deemed outstanding
includes shares issuable upon exercise of options, warrants and restricted stock units held by the respective person or group
which may be exercised or converted within 60 days after January 7, 2015. For purposes of calculating each person&rsquo;s or group&rsquo;s
percentage ownership, stock options, warrants exercisable and restricted stock units that could be settled within 60 days after
January 7, 2015 are included for that person or group but not the stock options, warrants or restricted stock units of any other
person or group. </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"> Applicable percentage ownership is
based on 4,934,601 shares of our common stock outstanding as of January 7, 2015. Percentage ownership of our common stock after
this offering includes our sale of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of common stock in this offering. </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">The address of each director and officer,
as well as that of Nelson Ludlow and Bonnie Ludlow, who are consultants to the Company is c/o Intellicheck Mobilisa, Inc. 191 Otto
Street, Port Townsend, Washington 98368.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid">Name</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Shares<BR> Beneficially<BR> Owned</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Percent</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">As <BR>
Adjusted</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 58%; font-size: 10pt; text-align: left">L. Gen. Emil R. Bedard</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">58,562</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">1.2</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 12%; font-size: 10pt; text-align: right">*</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left"><font style="font-size: 10pt">Russell T. Embry<sup>(1)</sup></font></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">5,156</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right"><font style="font-size: 10pt">*</font></TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">*</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt"><font style="font-size: 10pt">Bill White<sup>(2)</sup></font></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,506</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right"><font style="font-size: 10pt">*</font></TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">*</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left"><font style="font-size: 10pt">Guy L. Smith<sup>(3)</sup></font></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">21,369</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right"><font style="font-size: 10pt">*</font></TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">*</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left">William Roof</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right"><font style="font-size: 10pt">*</font></TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">*</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">William P. Georges</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,272</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right"><font style="font-size: 10pt">*</font></TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">*</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left">Robert N. Williamsen</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">*</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">*</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Jack A. Davis</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,272</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right"><font style="font-size: 10pt">*</font></TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">*</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Michael D. Malone</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">2,813</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"><font style="font-size: 10pt">*</font></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt; text-align: right; border-bottom: Black 1pt solid">*</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left"><font style="font-size: 10pt">All Executive Officers &amp; Directors as a group (9 persons)<sup>(4)</sup></font></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">91,952</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1.9</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-decoration: underline">5% Shareholders</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left"><font style="font-size: 10pt">Dr. Nelson Ludlow<sup>(5)</sup></font></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">527,091</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">10.7</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Bonnie Ludlow</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">862,035</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">17.5</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.7pt; color: Red"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.7pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.7pt">* Indicates beneficial ownership of less
than one percent of the total outstanding Common Stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.7pt"><SUP>(1)</SUP> <SUP> </SUP>Includes 5,156
shares issuable upon exercise of stock options exercisable within 60 days.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.7pt"><SUP>(2) </SUP>Includes 781 shares issuable
upon exercise of stock options exercisable within 60 days.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.7pt"><SUP>(3)</SUP> Includes 10,231 shares issuable
upon exercise of stock options exercisable within 60 days.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.7pt"><SUP>(4) </SUP>Includes 16,168 shares issuable
upon exercise of stock options exercisable within 60 days.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.7pt"><SUP>(5)</SUP> Includes 3,125 shares issuable
upon exercise of stock options exercisable within 60 days.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><A NAME="s1_18"></A>DESCRIPTION OF CAPITAL STOCK</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>General</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">The following descriptions are summaries
of the material terms of our amended and restated certificate of incorporation and amended and restated bylaws, and are qualified
by reference to our amended and restated certificate of incorporation and amended and restated bylaws. For more detailed information,
please see copies of these documents, which are included as exhibits to the registration statement of which this prospectus forms
a part. We refer in this section to our amended and restated certificate of incorporation as our certificate of incorporation,
and we refer to our amended and restated bylaws as our bylaws.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are a Delaware corporation. The rights
of our stockholders are governed by the Delaware General Corporation Law, or the DGCL, and our amended certificate of incorporation
and our amended and restated bylaws. The following summary of some of the material terms, rights and preferences of our capital
stock is not complete. You should read our amended certificate of incorporation, which we refer to as our certificate of incorporation,
and our amended and restated bylaws, which we refer to as our bylaws, for more complete information. In addition, you should be
aware that the summary below does not give full effect to the terms of the provisions of statutory or common law which may affect
your rights as a stockholder.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Common Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"> We may offer shares of our common stock
from time to time. Pursuant to our certificate of incorporation, we have the authority to issue 40,000,000&nbsp;shares of common
stock, $0.001&nbsp;par value. As of January 7, 2015, we had 4,934,601 shares of common stock outstanding. As of January 7, 2015,
there were approximately 54 holders of record of our common stock. We effected a one for eight reverse split of our common stock
on August 12, 2014. </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"> &nbsp; </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our common stockholders are entitled to
one vote for each share held on all matters submitted to them. The common stock does not have cumulative voting rights, meaning
that the holders of a majority of the shares of common stock voting for the election of directors can elect all the directors if
they choose to do so.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Each share of common stock is entitled to
participate equally in dividends as and when declared by our board of directors. The payment of dividends on our common stock may
be limited by obligations we may have to holders of any preferred stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If we liquidate or dissolve our business,
the holders of common stock will share ratably in the distribution of assets available for distribution to stockholders after creditors
are paid and preferred stockholders, if any, receive their distributions. The shares of common stock have no preemptive rights
and are not convertible, redeemable or assessable or entitled to the benefits of any sinking fund.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">All issued and outstanding shares of common
stock are fully paid and nonassessable. Any shares of common stock we offer under this prospectus will be fully paid and nonassessable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Preferred Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We may offer shares of our preferred stock
from time to time, in one or more series. Pursuant to our certificate of incorporation, we have the authority to issue 1,000,000&nbsp;shares
of preferred stock, $0.01&nbsp;par value. As of December 18, 2014, we had no shares of preferred stock outstanding. Our board of
directors may, without action by stockholders, issue one or more series of preferred stock. The board may determine for each series
the number of shares, designation, relative voting rights, dividend rates, liquidation and other rights, preferences and limitations.
The issuance of preferred stock could adversely affect the voting power of holders of common stock and reduce the likelihood that
common stockholders will receive dividend payments and payments upon liquidation. The issuance could decrease the market price
of our common stock. The issuance of preferred stock also could delay, deter or prevent a change of control of Intellicheck Mobilisa.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have summarized material provisions of
the preferred stock in this section. This summary is not complete. We will file a form of certificate of designation designating
the rights and preferences of the preferred stock with the SEC prior to any issuance of preferred stock, and you should read such
certificate of designation for provisions that may be important to you.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The certificate of designation relating
to any series of preferred stock we could offer would include specific terms relating to the offering. These terms will include
some or all of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the title of the preferred stock</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the maximum number of shares of the series;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the dividend rate or the method of calculating and paying the dividend, the date from which dividends will accrue and whether
dividends will be cumulative;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>any liquidation preference;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>any optional redemption provisions;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>any sinking fund or other provisions that would obligate us to redeem or purchase the preferred stock;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>any terms for the conversion or exchange of the preferred stock for other securities of us or any other entity;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>any voting rights;&nbsp;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>any other preferences and relative, participating, optional or other special rights or any qualifications, limitations or restrictions
on the rights of the shares; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>any shares of preferred stock we issue will be fully paid and nonassessable.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Delaware Anti-Takeover Law and Certain Charter and Bylaw
Provisions</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our certificate of incorporation, bylaws
and the DGCL contain certain provisions that could discourage potential takeover attempts and make it more difficult for our stockholders
to change management or receive a premium for their shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Delaware law.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are subject to Section&nbsp;203 of the
DGCL, an anti-takeover law. In general, the statute prohibits a publicly held Delaware corporation from engaging in a business
combination with an &ldquo;interested stockholder&rdquo; for a period of three years after the date of the transaction in which
the person became an interested stockholder. A &ldquo;business combination&rdquo; includes a merger, sale of 10% or more of our
assets and certain other transactions resulting in a financial benefit to the stockholder. For purposes of Section&nbsp;203, an
&ldquo;interested stockholder&rdquo; is defined to include any person that is:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the owner of 15% or more of the outstanding voting stock of the corporation;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>an affiliate or associate of the corporation and was the owner of 15% or more of the corporation&rsquo;s voting stock outstanding,
at any time within three years immediately before the relevant date; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>an affiliate or associate of the persons described in the foregoing bullet points.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">However, the above provisions of Section&nbsp;203
do not apply if:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>our board approves the transaction that made the stockholder an interested stockholder before the date of that transaction;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>after the completion of the transaction that resulted in the stockholder becoming an interested stockholder, that stockholder
owned at least 85% of our voting stock outstanding at the time the transaction commenced, excluding shares owned by our officers
and directors; or</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>on or subsequent to the date of the transaction, the business combinations approved by our board and authorized at a meeting
of our stockholders by an affirmative vote of at least two-thirds of the outstanding voting stock not owned by the interested stockholder.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Stockholders may, by adopting an amendment
to the corporation&rsquo;s certificate of incorporation or bylaws, elect for the corporation not to be governed by Section&nbsp;203,
effective 12&nbsp;months after adoption. Neither our certificate of incorporation nor our bylaws exempts us from the restrictions
imposed under Section&nbsp;203. It is anticipated that the provisions of Section&nbsp;203 may encourage companies interested in
acquiring us to negotiate in advance with our board.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Stockholder Proposals and Director Nominations.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our stockholders can submit stockholder
proposals and nominate candidates for our board of directors if the stockholders follow advance notice procedures described in
our bylaws.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">To nominate directors, stockholders must
submit a written notice at least 120 days before the first anniversary of the date of our proxy statement for the previous year&rsquo;s
annual stockholders&rsquo; meeting. The notice must include the name and address of the stockholder, the class and number of shares
owned by the stockholder, information about the nominee required by the SEC and the written consent of the nominee to serve as
a director. Our board of directors may require the nominee to furnish the same information as is required in the stockholders&rsquo;
notice that pertains to the nominee.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Stockholder proposals must be submitted
at least 120 days before the first anniversary of the date of our proxy statement for the previous year&rsquo;s annual stockholders&rsquo;
meeting. The notice must include a description of the proposal, the reasons for bringing the proposal before the meeting, the name
and address of the stockholder, the class and number of shares owned by the stockholder and any material interest of the stockholder
in the proposal.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In each case, if we did not hold an annual
meeting in the previous year or if we have changed the date of the annual meeting by more than 30&nbsp;days from the date contemplated
in the previous year&rsquo;s proxy statement, stockholders must submit the notice within a reasonable time before we begin to print
and send our proxy materials.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Director nominations and stockholder proposals
that are late or that do not include all required information may be rejected. This could prevent stockholders from bringing certain
matters before an annual meeting, including making nominations for directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Limitation of Liability; Indemnification</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our certificate of incorporation contains
certain provisions permitted under the DGCL relating to the liability of directors. These provisions eliminate a director&rsquo;s
personal liability for monetary damages resulting from a breach of fiduciary duty, except that a director will be personally liable:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>for any breach of the director&rsquo;s duty of loyalty to us or our stockholders;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>under Section&nbsp;174 of the DGCL relating to unlawful stock repurchases or dividends; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>for any transaction from which the director derives an improper personal benefit.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">These provisions do not limit or eliminate our rights or those
of any stockholder to seek non-monetary relief, such as an injunction or rescission, in the event of a breach of a director&rsquo;s
fiduciary duty. These provisions will not alter a director&rsquo;s liability under federal securities laws.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Stock Exchange</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our common stock is listed on the NYSE MKT
LLC under the symbol &ldquo;IDN.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Transfer Agent and Registrar</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Transfer Agent and Registrar for our
common stock is Continental Stock Transfer, 17 Battery Place, 8<SUP>th</SUP> Floor, New York, NY 10004. Its phone number is (212)
509-4000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><A NAME="s1_19"></A>SHARES ELIGIBLE FOR FUTURE SALE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Future sales of our common stock in the
public market, or the availability of such shares for sale in the public market, could adversely affect market prices prevailing
from time to time. As described below, only a limited number of shares will be available for sale shortly after this offering due
to contractual and legal restrictions on resale. Nevertheless, sales of our common stock in the public market after such restrictions
lapse, or the perception that those sales may occur, could adversely affect the prevailing market price at such time and our ability
to raise equity capital in the future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"> Based on the number of shares outstanding
as of January 7, 2015, upon the completion of this offering, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares
of our common stock will be outstanding, assuming no exercise of the underwriters&rsquo; option to purchase additional shares
and no exercise of outstanding options after January 7, 2015. Of these shares, all of the shares sold in this offering and all
of the shares of common stock sold in our other public offerings will be freely tradable, unless these shares are held by our
affiliates, as that term is defined in Rule 144 under the Securities Act. </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"> &nbsp; </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The remaining outstanding shares of our
common stock are deemed &ldquo;restricted securities&rdquo; as defined in Rule 144. Restricted securities may be sold in the public
market only if they are registered or if they qualify for an exemption from registration under Rule 144 or Rule 701 under the Securities
Act, which rules are summarized below. In addition, all of our officers and directors have agreed with the underwriters of this
offering, subject to certain exceptions, not to dispose of or hedge any of their common stock or securities convertible into or
exchangeable for our common stock during the period ending 90 days after the date of this prospectus, except with the prior written
consent of Aegis Capital Corp. As a result of these agreements, subject to the provisions of Rule 144 or Rule 701, shares
will be available for sale in the public market as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares sold in this offering will be immediately available for sale in the public market; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>91,952 shares will be eligible for sale in the public market on _________ ___, 2015 upon the expiration of lock-up agreements
entered into in connection with this offering.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Rule 144</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In general, a person who has beneficially
owned restricted stock for at least six months would be entitled to sell their securities provided that (i) such person is not
deemed to have been one of our affiliates at the time of, or at any time during the 90 days preceding, a sale and (ii) we are subject
to the Securities Exchange Act of 1934, as amended, or the Exchange Act, periodic reporting requirements for at least 90 days before
the sale. Persons who have beneficially owned restricted shares for at least six months but who are our affiliates at the time
of, or any time during the 90 days preceding, a sale, would be subject to additional restrictions, by which such person would be
entitled to sell within any three-month period only a number of securities that does not exceed the greater of either of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol"> &middot; </FONT></TD><TD> 1% of the
                                         number of shares then outstanding, which will equal approximately shares&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;immediately
                                         after this offering assuming no exercise of the underwriters&rsquo; option to purchase
                                         additional shares, based on the number of shares outstanding as of January 7, 2015; or </TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the average weekly trading volume of our common stock on during the four calendar weeks preceding the filing of a notice on
Form 144 with respect to the sale.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Provided in each case that we are subject to the Exchange Act
periodic reporting requirements for at least 90 days before the sale, such sales both by affiliates and by non-affiliates must
also comply with the manner of sale, current public information and notice provisions of Rule 144.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Rule 701</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Rule 701 generally allows a stockholder
who purchased shares of our common stock pursuant to a written compensatory plan or contract and who is not deemed to have been
an affiliate of our company during the immediately preceding 90 days to sell these shares in reliance upon Rule 144, but without
being required to comply with the public information, holding period, volume limitation or notice provisions of Rule 144. Rule
701 also permits affiliates of our company to sell their Rule 701 shares under Rule 144 without complying with the holding period
requirements of Rule 144.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Lock-up Agreements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"> In connection with this offering, all
of our directors and executive officers, who collectively held 91,952 shares of common stock as January 7, 2015, have signed lock-up
agreements that prevent them from selling any of our common stock or any securities convertible into or exercisable or exchangeable
for common stock for a period of not less than 90 days from the date of the preliminary prospectus prepared for this offering
without the prior written consent of each of Aegis Capital Corp. The representatives may in their sole discretion and at any time
without notice release some or all of the shares subject to lock-up agreements prior to the expiration of the 90-day period. When
determining whether or not to release shares from the lock-up agreements, the representatives may consider, among other factors,
the stockholder&rsquo;s reasons for requesting the release, the number of shares for which the release is being requested and
market conditions at the time. </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &nbsp;&nbsp; </P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.25in"><B><A NAME="s1_21"></A>UNDERWRITING</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 29.4pt">Aegis Capital Corp. is acting
as the representative of the underwriters of the offering. We have entered into an underwriting agreement dated &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2015 with the
representative. Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to the underwriters
named below and the underwriters named below have severally agreed to purchase, at the public offering price less the underwriting
discounts and commissions set forth on the cover page of this prospectus, the following respective number of shares of our common
stock:&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6.6pt; text-indent: 29.4pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 92%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; border-bottom: Black 1pt solid">Underwriter</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Number of Shares</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 80%; text-align: left; padding-bottom: 2.5pt; text-indent: -10pt; padding-left: 10pt">Aegis Capital Corp.</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="width: 17%; border-bottom: Black 2.5pt double; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 29.4pt">&#9;The underwriters are committed to
purchase all the shares of common stock offered by us other than those covered by the option to purchase additional shares described
below, if they purchase any shares. The obligations of the underwriters may be terminated upon the occurrence of certain events
specified in the underwriting agreement. Furthermore, pursuant to the underwriting agreement, the underwriters&rsquo; obligations
are subject to customary conditions, representations and warranties contained in the underwriting agreement, such as receipt by
the underwriters of officers&rsquo; certificates and legal opinions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 16.55pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have agreed to indemnify the underwriters
against specified liabilities, including liabilities under the Securities Act of 1933, and to contribute to payments the underwriters
may be required to make in respect thereof.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 16.55pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The underwriters are offering the common
stock, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel
and other conditions specified in the underwriting agreement. The underwriters reserve the right to withdraw, cancel or modify
offers to the public and to reject orders in whole or in part.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 16.55pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"> The underwriters propose to offer the
common stock offered by us to the public at the public offering price set forth on the cover of this prospectus. In addition,
the underwriters may offer some of the common stock to other securities dealers at such price less a concession of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
per share. After the initial offering, the public offering price and concession to dealers may be changed. </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 16.55pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have granted the underwriters an
over-allotment option. This option, which is exercisable for up to 45 days after the date of this prospectus, permits the
underwriters to purchase a maximum of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; additional shares of common stock from us solely to cover over-allotments, if
any. If the underwriters exercise all or part of this option, they will purchase shares of common stock covered by the
option at the public offering price that appears on the cover page of this prospectus, less the underwriting discount. If
this option is exercised in full, the total price to the public will be approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million and the total proceeds to
us, before expenses will be $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 16.55pt"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Discounts and Commissions</I>.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table shows the public offering
price, underwriting discount and proceeds, before expenses, to us. The information assumes either no exercise or full exercise
by the underwriters of their over-allotment option.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 16.55pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 16.55pt"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: justify">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Total</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: justify">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Per Share</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Without<BR> Over-Allotment</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">With<BR> Over-Allotment</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 61%; text-align: justify">Public Offering Price</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify; padding-bottom: 1pt">Underwriting Discount</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: justify">Proceeds, before expenses, to us</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 16.55pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"> We have agreed to pay the underwriters
a non-accountable expense allowance equal to 0.5% of the public offering price of the shares (excluding shares that we may sell
to the underwriters to cover over-allotments). We have also agreed to pay all expenses relating to the offering, including (a)
all filing fees and communication expenses relating to the registration of the shares to be sold in the offering (including shares
sold upon exercise of the underwriters&rsquo; over-allotment option) with the Securities and Exchange Commission; (b) all fees
associated with the review of the offering by FINRA and all fees and expenses relating to the listing of such shares on the NYSE
MKT; (c) all fees, expenses and disbursements relating to the registration, qualification or exemption of securities offered under
the &ldquo;blue sky&rdquo; securities laws designated by the underwriters; (d) all fees, expenses and disbursements relating to
the registration, qualification or exemption of securities offered under the securities laws of foreign jurisdictions designated
by the underwriters; (e) costs associated with bound volumes of the public offering materials as well as commemorative mementos
and lucite tombstones, each of which we or our designee will provide within a reasonable time after closing in such quantities
as the underwriter may reasonably request, not to exceed $2,000 in the aggregate; (f) fees and expenses of the underwriters&rsquo;
legal counsel not to exceed $50,000; (g) the $25,000 cost associated with the use of Ipreo&rsquo;s book building, prospectus tracking,
and compliance software for the offering; (h) all fees, expenses incurred by the Representative in conducting background checks
of our directors and officers in an amount not to exceed $1,500 per individual and $15,000 in the aggregate; and (i) up to $20,000
of the underwriter&rsquo;s actual accountable &ldquo;road show&rdquo; expenses for the offering. </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 14.3pt">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"> We estimate that the total expenses
of the offering, excluding underwriting discount, will be approximately $200,000. </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.2in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Lock-Up Agreements</I>.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Pursuant to certain &ldquo;lock-up&rdquo;
agreements, (a) our executive officers and directors as of the pricing date of the offering, have agreed, subject to certain exceptions,
not to offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any securities
of the Company without the prior written consent of the representative, for a period of 3 months from the date of the offering,
and (b) we, and any successor, have agreed, subject to certain exceptions, not to for a period of 3 months from the date of the
pricing of the offering (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly,
any shares of our capital stock; (2) file or caused to be filed any registration statement with the SEC relating to the offering
of any shares of our capital stock or any securities convertible into or exercisable or exchangeable for shares of our capital
stock; or (3) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences
of ownership of our capital stock, whether any such transaction described in (1), (2), or (3) above is to be settled by delivery
of shares of our capital stock or such other securities, in cash or otherwise.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.2in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">This lock-up provision applies to common
stock and to securities convertible into or exchangeable or exercisable for common stock. It also applies to common stock owned
now or acquired later by the person executing the agreement or for which the person executing the agreement later acquires the
power of disposition. The exceptions permit, among other things and subject to restrictions, (1) the issuance by us of stock options
pursuant to our existing stock incentive plans, (2) the issuance of common stock upon the exercise of outstanding stock options
and warrants or (3) transfers pursuant to a sale or an offer to purchase 100% of our outstanding common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.2in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The restricted period described in the preceding
paragraph will be extended if:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&bull;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
during the last 17 days of the restricted period we issue a release regarding earnings or regarding material news or events relating
to us; or</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&bull;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
prior to the expiration of the restricted period, we announce that we will release earnings results during the 16-day period beginning
on the last day of the period, in which case the restrictions described in the preceding paragraph will continue to apply until
the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or
material event.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.2in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Right of First Refusal</I>.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"> Until twelve months from the effective
date of the registration statement, the representative shall have an irrevocable right of first refusal to act as sole investment
banker or sole book runner, exclusive placement agent, exclusive financial advisor or in any other similar capacity, on the representative&rsquo;s
customary terms and conditions, in the event our company or any subsidiary retains or otherwise uses (or seeks to retain or use)
the services of an investment bank or similar financial advisor to pursue a registered, underwritten public offering of, a private
placement of securities, or other similar transaction. </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.2in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Electronic Offer, Sale and Distribution of Shares</I>.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">A prospectus in electronic format may be
made available on the websites maintained by one or more of the underwriters or selling group members, if any, participating in
this offering and one or more of the underwriters participating in this offering may distribute prospectuses electronically. The
representative may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage
account holders. Internet distributions will be allocated by the underwriters and selling group members that will make internet
distributions on the same basis as other allocations. Other than the prospectus in electronic format, the information on these
websites is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved
or endorsed by us or any underwriter in its capacity as underwriter, and should not be relied upon by investors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Other Relationships</I>.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Certain of the underwriters and their affiliates
have provided, and may in the future provide, various investment banking, commercial banking and other financial services for us
and our affiliates for which they have received, and may in the future receive, customary fees; however, except as disclosed in
this prospectus, we have no present arrangements with any of the underwriters for any further services.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.2in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Stabilization</I>.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In connection with this offering, the underwriters
may engage in stabilizing transactions, overallotment transactions, syndicate covering transactions, penalty bids and purchases
to cover positions created by short sales.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Stabilizing transactions permit bids to purchase shares so long as the stabilizing bids do not exceed a specified maximum,
and are engaged in for the purpose of preventing or retarding a decline in the market price of the shares while the offering is
in progress;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Overallotment transactions involve sales by the underwriters of shares in excess of the number of shares the underwriters are
obligated to purchase. This creates a syndicate short position which may be either a covered short position or a naked short position.
In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares that
they may purchase in the overallotment option. In a naked short position, the number of shares involved is greater than the number
of shares in the overallotment option. The underwriters may close out any short position by exercising their overallotment option
and/or purchasing shares in the open market;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Syndicate covering transactions involve purchases of shares in the open market after the distribution has been completed in
order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters
will consider, among other things, the price of shares available for purchase in the open market as compared with the price at
which they may purchase shares through exercise of the overallotment option. If the underwriters sell more shares than could be
covered by exercise of the overallotment option and, therefore, have a naked short position, the position can be closed out only
by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that
after pricing there could be downward pressure on the price of the shares in the open market that could adversely affect investors
who purchase in the offering; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Penalty bids permit the representative to reclaim a selling concession from a syndicate member when the shares originally sold
by that syndicate member are purchased in stabilizing or syndicate covering transactions to cover syndicate short positions.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">These stabilizing transactions, syndicate covering transactions
and penalty bids may have the effect of raising or maintaining the market price of our shares of common stock or preventing or
retarding a decline in the market price of our shares of common stock. As a result, the price of our common stock in the open market
may be higher than it would otherwise be in the absence of these transactions. Neither we nor the underwriters make any representation
or prediction as to the effect that the transactions described above may have on the price of our common stock. These transactions
may be effected on NYSE MKT.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 16.55pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 16.55pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Offer restrictions outside the United States</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">Other than in the United States, no action
has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any
jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly
or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of
any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance
with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised
to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This
prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus
in any jurisdiction in which such an offer or a solicitation is unlawful.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Australia</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">This prospectus is not a disclosure document
under Chapter 6D of the Australian Corporations Act, has not been lodged with the Australian Securities and Investments Commission
and does not purport to include the information required of a disclosure document under Chapter 6D of the Australian Corporations
Act. Accordingly, (i) the offer of the securities under this prospectus is only made to persons to whom it is lawful to offer the
securities without disclosure under Chapter 6D of the Australian Corporations Act under one or more exemptions set out in section
708 of the Australian Corporations Act, (ii) this prospectus is made available in Australia only to those persons as set forth
in clause (i) above, and (iii) the offeree must be sent a notice stating in substance that by accepting this offer, the offeree
represents that the offeree is such a person as set forth in clause (i) above, and, unless permitted under the Australian Corporations
Act, agrees not to sell or offer for sale within Australia any of the securities sold to the offeree within 12 months after its
transfer to the offeree under this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>China</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">The information in this document does not
constitute a public offer of the securities, whether by way of sale or subscription, in the People&rsquo;s Republic of China (excluding,
for purposes of this paragraph, Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan). The securities
may not be offered or sold directly or indirectly in the PRC to legal or natural persons other than directly to &ldquo;qualified
domestic institutional investors.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>European Economic Area&nbsp;&mdash;&nbsp;Belgium, Germany,
Luxembourg and Netherlands</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">The information in this document has been
prepared on the basis that all offers of securities will be made pursuant to an exemption under the Directive 2003/71/EC (&ldquo;Prospectus
Directive&rdquo;), as implemented in Member States of the European Economic Area (each, a &ldquo;Relevant Member State&rdquo;),
from the requirement to produce a prospectus for offers of securities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">An offer to the public of securities has
not been made, and may not be made, in a Relevant Member State except pursuant to one of the following exemptions under the Prospectus
Directive as implemented in that Relevant Member State:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(a)</TD><TD>to legal entities that are authorized or regulated to operate in the financial markets or, if not so authorized or regulated,
whose corporate purpose is solely to invest in securities;</TD></TR>                                                                    <TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR>
</TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(b)</TD><TD>to any legal entity that has two or more of (i) an average of at least 250 employees during its last fiscal year; (ii) a total
balance sheet of more than &euro;43,000,000 (as shown on its last annual unconsolidated or consolidated financial statements) and
(iii) an annual net turnover of more than &euro;50,000,000 (as shown on its last annual unconsolidated or consolidated financial
statements);</TD></TR>                      <TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR>
</TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(c)</TD><TD>to fewer than 100 natural or legal persons (other than qualified investors within the meaning of Article 2(1)(e) of the Prospectus
Directive) subject to obtaining the prior consent of the Company or any underwriter for any such offer; or</TD></TR>                                                                                                                    <TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR>
</TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(d)</TD><TD>in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of securities
shall result in a requirement for the publication by the Company of a prospectus pursuant to Article 3 of the Prospectus Directive.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>France</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">This document is not being distributed in
the context of a public offering of financial securities (offre au public de titres financiers) in France within the meaning of
Article L.411-1 of the French Monetary and Financial Code (Code mon&eacute;taire et financier) and Articles 211-1 et seq. of the
General Regulation of the French Autorit&eacute; des march&eacute;s financiers (&ldquo;AMF&rdquo;). The securities have not been
offered or sold and will not be offered or sold, directly or indirectly, to the public in France.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">This document and any other offering material
relating to the securities have not been, and will not be, submitted to the AMF for approval in France and, accordingly, may not
be distributed or caused to distributed, directly or indirectly, to the public in France.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">Such offers, sales and distributions have
been and shall only be made in France to (i) qualified investors (investisseurs qualifi&eacute;s) acting for their own account,
as defined in and in accordance with Articles L.411-2-II-2&deg; and D.411-1 to D.411-3, D. 744-1, D.754-1 and D.764-1 of the French
Monetary and Financial Code and any implementing regulation and/or (ii) a restricted number of non-qualified investors (cercle
restreint d&rsquo;investisseurs) acting for their own account, as defined in and in accordance with Articles L.411-2-II-2&deg;
and D.411-4, D.744-1, D.754-1 and D.764-1 of the French Monetary and Financial Code and any implementing regulation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">Pursuant to Article 211-3 of the General
Regulation of the AMF, investors in France are informed that the securities cannot be distributed (directly or indirectly) to the
public by the investors otherwise than in accordance with Articles L.411-1, L.411-2, L.412-1 and L.621-8 to L.621-8-3 of the French
Monetary and Financial Code.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Ireland</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">The information in this document does not
constitute a prospectus under any Irish laws or regulations and this document has not been filed with or approved by any Irish
regulatory authority as the information has not been prepared in the context of a public offering of securities in Ireland within
the meaning of the Irish Prospectus (Directive 2003/71/EC) Regulations 2005 (the &ldquo;Prospectus Regulations&rdquo;). The securities
have not been offered or sold, and will not be offered, sold or delivered directly or indirectly in Ireland by way of a public
offering, except to (i) qualified investors as defined in Regulation 2(l) of the Prospectus Regulations and (ii) fewer than 100
natural or legal persons who are not qualified investors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Israel</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">The securities offered by this prospectus
have not been approved or disapproved by the Israeli Securities Authority (the ISA), or ISA, nor have such securities been registered
for sale in Israel. The shares may not be offered or sold, directly or indirectly, to the public in Israel, absent the publication
of a prospectus. The ISA has not issued permits, approvals or licenses in connection with the offering or publishing the prospectus;
nor has it authenticated the details included herein, confirmed their reliability or completeness, or rendered an opinion as to
the quality of the securities being offered. Any resale in Israel, directly or indirectly, to the public of the securities offered
by this prospectus is subject to restrictions on transferability and must be effected only in compliance with the Israeli securities
laws and regulations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Italy</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">The offering of the securities in the Republic
of Italy has not been authorized by the Italian Securities and Exchange Commission (Commissione Nazionale per le Societ&agrave;
e la Borsa, &ldquo;CONSOB&rdquo; pursuant to the Italian securities legislation and, accordingly, no offering material relating
to the securities may be distributed in Italy and such securities may not be offered or sold in Italy in a public offer within
the meaning of Article 1.1(t) of Legislative Decree No. 58 of 24 February 1998 (&ldquo;Decree No. 58&rdquo;), other than:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">&bull;</TD><TD>to Italian qualified investors, as defined in Article 100 of Decree no. 58 by reference to Article 34-ter of CONSOB Regulation
no. 11971 of 14 May 1999 (&ldquo;Regulation no. 1197l&rdquo;) as amended (&ldquo;Qualified Investors&rdquo;); and</TD></TR>                                                                                                                           <TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR>
</TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">&bull;</TD><TD>in other circumstances that are exempt from the rules on public offer pursuant to Article 100 of Decree No. 58 and Article
34-ter of Regulation No. 11971 as amended.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">Any offer, sale or delivery of the securities
or distribution of any offer document relating to the securities in Italy (excluding placements where a Qualified Investor solicits
an offer from the issuer) under the paragraphs above must be:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">&bull;</TD><TD>made by investment firms, banks or financial intermediaries permitted to conduct such activities in Italy in accordance with
Legislative Decree No. 385 of 1 September 1993 (as amended), Decree No. 58, CONSOB Regulation No. 16190 of 29 October 2007 and
any other applicable laws; and</TD></TR>                                        <TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR>
</TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">&bull;</TD><TD>in compliance with all relevant Italian securities, tax and exchange controls and any other applicable laws.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">Any subsequent distribution of the securities
in Italy must be made in compliance with the public offer and prospectus requirement rules provided under Decree No. 58 and the
Regulation No. 11971 as amended, unless an exception from those rules applies. Failure to comply with such rules may result in
the sale of such securities being declared null and void and in the liability of the entity transferring the securities for any
damages suffered by the investors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Japan</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">The securities have not been and will not
be registered under Article 4, paragraph 1 of the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948), as amended
(the &ldquo;FIEL&rdquo;) pursuant to an exemption from the registration requirements applicable to a private placement of securities
to Qualified Institutional Investors (as defined in and in accordance with Article 2, paragraph 3 of the FIEL and the regulations
promulgated thereunder). Accordingly, the securities may not be offered or sold, directly or indirectly, in Japan or to, or for
the benefit of, any resident of Japan other than Qualified Institutional Investors. Any Qualified Institutional Investor who acquires
securities may not resell them to any person in Japan that is not a Qualified Institutional Investor, and acquisition by any such
person of securities is conditional upon the execution of an agreement to that effect.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Portugal</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">This document is not being distributed in
the context of a public offer of financial securities (oferta p&uacute;blica de valores mobili&aacute;rios) in Portugal, within
the meaning of Article 109 of the Portuguese Securities Code (C&oacute;digo dos Valores Mobili&aacute;rios). The securities have
not been offered or sold and will not be offered or sold, directly or indirectly, to the public in Portugal. This document and
any other offering material relating to the securities have not been, and will not be, submitted to the Portuguese Securities Market
Commission (Comiss&atilde;o do Mercado de Valores Mobili&aacute;rios) for approval in Portugal and, accordingly, may not be distributed
or caused to distributed, directly or indirectly, to the public in Portugal, other than under circumstances that are deemed not
to qualify as a public offer under the Portuguese Securities Code. Such offers, sales and distributions of securities in Portugal
are limited to persons who are &ldquo;qualified investors&rdquo; (as defined in the Portuguese Securities Code). Only such investors
may receive this document and they may not distribute it or the information contained in it to any other person.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Sweden</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">This document has not been, and will not
be, registered with or approved by Finansinspektionen (the Swedish Financial Supervisory Authority). Accordingly, this document
may not be made available, nor may the securities be offered for sale in Sweden, other than under circumstances that are deemed
not to require a prospectus under the Swedish Financial Instruments Trading Act (1991:980) (Sw. lag (1991:980) om handel med finansiella
instrument). Any offering of securities in Sweden is limited to persons who are &ldquo;qualified investors&rdquo; (as defined in
the Financial Instruments Trading Act). Only such investors may receive this document and they may not distribute it or the information
contained in it to any other person.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Switzerland</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">The securities may not be publicly offered
in Switzerland and will not be listed on the SIX Swiss Exchange (&ldquo;SIX&rdquo;) or on any other stock exchange or regulated
trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses
under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27
ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither
this document nor any other offering material relating to the securities may be publicly distributed or otherwise made publicly
available in Switzerland.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">Neither this document nor any other offering
material relating to the securities have been or will be filed with or approved by any Swiss regulatory authority. In particular,
this document will not be filed with, and the offer of securities will not be supervised by, the Swiss Financial Market Supervisory
Authority (FINMA).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">This document is personal to the recipient
only and not for general circulation in Switzerland.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>United Arab Emirates</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">Neither this document nor the securities
have been approved, disapproved or passed on in any way by the Central Bank of the United Arab Emirates or any other governmental
authority in the United Arab Emirates, nor has the Company received authorization or licensing from the Central Bank of the United
Arab Emirates or any other governmental authority in the United Arab Emirates to market or sell the securities within the United
Arab Emirates. This document does not constitute and may not be used for the purpose of an offer or invitation. No services relating
to the securities, including the receipt of applications and/or the allotment or redemption of such shares, may be rendered within
the United Arab Emirates by the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">No offer or invitation to subscribe for securities
is valid or permitted in the Dubai International Financial Centre.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>United Kingdom</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">Neither the information in this document
nor any other document relating to the offer has been delivered for approval to the Financial Services Authority in the United
Kingdom and no prospectus (within the meaning of section 85 of the Financial Services and Markets Act 2000, as amended (&ldquo;FSMA&rdquo;))
has been published or is intended to be published in respect of the securities. This document is issued on a confidential basis
to &ldquo;qualified investors&rdquo; (within the meaning of section 86(7) of FSMA) in the United Kingdom, and the securities may
not be offered or sold in the United Kingdom by means of this document, any accompanying letter or any other document, except in
circumstances which do not require the publication of a prospectus pursuant to section 86(1) FSMA. This document should not be
distributed, published or reproduced, in whole or in part, nor may its contents be disclosed by recipients to any other person
in the United Kingdom.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">Any invitation or inducement to engage in
investment activity (within the meaning of section 21 of FSMA) received in connection with the issue or sale of the securities
has only been communicated or caused to be communicated and will only be communicated or caused to be communicated in the United
Kingdom in circumstances in which section 21(1) of FSMA does not apply to us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">In the United Kingdom, this document is
being distributed only to, and is directed at, persons (i) who have professional experience in matters relating to investments
falling within Article 19(5) (investment professionals) of the Financial Services and Markets Act 2000 (Financial Promotions)
Order 2005 (&ldquo;FPO&rdquo;), (ii) who fall within the categories of persons referred to in Article 49(2)(a) to (d) (high net
worth companies, unincorporated associations, etc.) of the FPO or (iii) to whom it may otherwise be lawfully communicated (together
&ldquo;relevant persons&rdquo;). The investments to which this document relates are available only to, and any invitation, offer
or agreement to purchase will be engaged in only with, relevant persons. Any person who is not a relevant person should not act
or rely on this document or any of its contents.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><A NAME="s1_22"></A>LEGAL MATTERS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The validity of the shares of common stock
offered by this prospectus will be passed upon for us by K&amp;L Gates LLP, Seattle, Washington. Certain legal matters will be
passed upon for the underwriters by Loeb &amp; Loeb LLP, New York, New York.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.25in"><B><A NAME="s1_23"></A>EXPERTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The consolidated balance sheets of Intellicheck
Mobilisa, Inc. as of December 31, 2013 and 2012, and the related consolidated statements of operations, stockholders&rsquo; equity,
and cash flows for each of the years in the two-year period ended December 31, 2013, have been audited by EisnerAmper LLP, independent
registered public accounting firm, as stated in their report which is incorporated herein by reference in reliance on the report
of such firm given upon their authority as experts in accounting and auditing.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="s1_24"></A><B>WHERE YOU CAN FIND MORE INFORMATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have filed with the SEC a registration
statement on Form S-1 under the Securities Act with respect to the common stock we are offering by this prospectus. This prospectus
does not contain all of the information included in the registration statement. For further information pertaining to us and our
common stock, you should refer to the registration statement and to its exhibits. Whenever we make reference in this prospectus
to any of our contracts, agreements or other documents, the references are not necessarily complete, and you should refer to the
exhibits attached to the registration statement for copies of the actual contract, agreement or other document. You may obtain
copies of this information by mail from the Public Reference Section of the SEC, 100 F Street, N.E., Room 1580, Washington, D.C.
20549, at prescribed rates. You may obtain information on the operation of the public reference rooms by calling the SEC at 1-800-SEC-0330.
The SEC also maintains an Internet website that contains reports, proxy statements and other information about issuers, like us,
that file electronically with the SEC. The address of that website is www.sec.gov.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are subject to the informational and
reporting requirements of the Securities Exchange Act of 1934 and, in accordance with this law, file annual, quarterly and current
reports, proxy statements and other information with the SEC. You can read our SEC filings, including the registration statement,
over the Internet at the SEC&rsquo;s website at www.sec.gov. You may also read and copy any document we file with the SEC at its
public reference facility and the website of the SEC referred to above. We also maintain a website at www.icmobil.com. You may
access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished
to, the SEC. Information contained on our website is not a part of this prospectus and the inclusion of our website address in
this prospectus is an inactive textual reference only.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><A NAME="s1_25"></A>INTELLICHECK MOBILISA, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Index to Financial Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">


<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD STYLE="width: 92%"> <A HREF="#s1_27"><FONT STYLE="font-size: 10pt">Consolidated Balance Sheets - September 30, 2014
    (Unaudited) and December 31, 2013</FONT></A> </TD>
    <TD STYLE="text-align: center; vertical-align: bottom; width: 8%"><FONT STYLE="font-size: 10pt"> F-1 </FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD> &nbsp; </TD>
    <TD STYLE="text-align: center; vertical-align: bottom"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD> <A HREF="#s1_28"><FONT STYLE="font-size: 10pt">Consolidated Statements of Operations for the Three and Nine Months
    Ended September 30, 2014 and 2013 (Unaudited)</FONT></A> </TD>
    <TD STYLE="text-align: center; vertical-align: bottom"><FONT STYLE="font-size: 10pt"> F-2 </FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD> &nbsp; </TD>
    <TD STYLE="text-align: center; vertical-align: bottom"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD> <A HREF="#s1_29"><FONT STYLE="font-size: 10pt">Consolidated Statements of Stockholders&rsquo; Equity for the nine months
    ended September 30, 2014 (Unaudited)</FONT></A> </TD>
    <TD STYLE="text-align: center; vertical-align: bottom"><FONT STYLE="font-size: 10pt"> F-3 </FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD> &nbsp; </TD>
    <TD STYLE="text-align: center; vertical-align: bottom"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD> <A HREF="#s1_30"><FONT STYLE="font-size: 10pt">Consolidated Statements of Cash Flows for the nine months ended September
    30, 2014 (Unaudited) </FONT></A> </TD>
    <TD STYLE="text-align: center; vertical-align: bottom"><FONT STYLE="font-size: 10pt"> F-4 </FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD> &nbsp; </TD>
    <TD STYLE="text-align: center; vertical-align: bottom"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD> <A HREF="#s1_31"><FONT STYLE="font-size: 10pt">Notes to Consolidated Financial Statements (Unaudited)</FONT></A> </TD>
    <TD STYLE="text-align: center; vertical-align: bottom"><FONT STYLE="font-size: 10pt"> F-5 </FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD> <A HREF="#s1_26"><FONT STYLE="font-size: 10pt">Report of Independent Registered Public Accounting
    Firm</FONT></A> </TD>
    <TD STYLE="text-align: center; vertical-align: bottom"><FONT STYLE="font-size: 10pt"> F-12 </FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD> &nbsp; </TD>
    <TD STYLE="text-align: center; vertical-align: bottom"> &nbsp; </TD></TR>

<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD STYLE="width: 92%"> <A HREF="#s1_32"><FONT STYLE="font-size: 10pt">Consolidated Balance Sheets as of December 31, 2013
    and 2012</FONT></A> </TD>
    <TD STYLE="text-align: center; vertical-align: bottom; width: 8%"><FONT STYLE="font-size: 10pt"> F-13 </FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD> &nbsp; </TD>
    <TD STYLE="text-align: center; vertical-align: bottom"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD> <A HREF="#s1_33"><FONT STYLE="font-size: 10pt">Consolidated Statements of Operations for the Years Ended December 31,
    2013 and 2012</FONT></A> </TD>
    <TD STYLE="text-align: center; vertical-align: bottom"><FONT STYLE="font-size: 10pt"> F-14 </FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD> &nbsp; </TD>
    <TD STYLE="text-align: center; vertical-align: bottom"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD> <A HREF="#s1_34"><FONT STYLE="font-size: 10pt">Consolidated Statements of Stockholders&rsquo; Equity for the Years
    Ended December 31, 2013 and 2012</FONT></A> </TD>
    <TD STYLE="text-align: center; vertical-align: bottom"><FONT STYLE="font-size: 10pt"> F-15 </FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD> &nbsp; </TD>
    <TD STYLE="text-align: center; vertical-align: bottom"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD> <A HREF="#s1_35"><FONT STYLE="font-size: 10pt">Consolidated Statements of Cash Flows for the Years Ended December 31,
    2013 and 2012</FONT></A> </TD>
    <TD STYLE="text-align: center; vertical-align: bottom"><FONT STYLE="font-size: 10pt"> F-16 </FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD> &nbsp; </TD>
    <TD STYLE="text-align: center; vertical-align: bottom"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD> <A HREF="#s1_36"><FONT STYLE="font-size: 10pt">Notes to Consolidated Financial Statements </FONT></A> </TD>
    <TD STYLE="text-align: center; vertical-align: bottom"><FONT STYLE="font-size: 10pt"> F-17 </FONT></TD></TR>

</TABLE>

<P STYLE="margin: 0">&nbsp;&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="s1_27"></A><B>INTELLICHECK MOBILISA, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONSOLIDATED BALANCE SHEETS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">September 30,</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">December 31,</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">(Unaudited)</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: center">ASSETS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">CURRENT ASSETS:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 74%; text-align: left; padding-left: 9pt">Cash and cash equivalents</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">3,066,968</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">224,386</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 0.25in">Accounts receivable, net of allowance of $0 as of September 30, 2014, and December 31, 2013</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,622,301</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,041,519</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9pt">Inventory</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">115,021</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">54,677</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Other current assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">90,796</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">107,519</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.75in">Total current assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,895,086</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,428,101</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">PROPERTY AND EQUIPMENT, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">348,919</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">369,095</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>GOODWILL</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,308,661</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,308,661</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">INTANGIBLE ASSETS, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,972,812</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,724,354</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">OTHER ASSETS</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">72,006</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">72,006</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 0.75in">Total assets</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">22,597,484</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">17,902,217</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: center">LIABILITIES AND STOCKHOLDERS&rsquo; EQUITY</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">CURRENT LIABILITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Accounts payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">637,492</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">478,588</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 9pt">Accrued expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">637,898</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">701,928</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Deferred revenue, current portion</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,173,130</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">967,912</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Other current liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">505,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.75in">Total current liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,953,520</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,148,428</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">OTHER LIABILITIES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 9pt">Deferred revenue, long-term portion</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">495,614</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">233,732</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Deferred rent</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">134,965</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">163,753</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Other long-term liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">82,500</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">0</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.75in">Total liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,666,599</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,545,913</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">STOCKHOLDERS&rsquo; EQUITY:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 0.25in">Common stock - $.001 par value; 40,000,000 shares authorized; 4,932,057
    and 3,486,557 shares issued and outstanding, respectively</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,932</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,487</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Additional paid-in capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">106,264,525</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">101,008,381</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Accumulated deficit</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(87,338,572</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(85,655,564</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.75in">Total stockholders&rsquo; equity</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">18,930,885</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">15,356,304</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 0.75in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 0.75in">Total liabilities and stockholders&rsquo; equity</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">22,597,484</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">17,902,217</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">See accompanying notes to consolidated financial statements</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="s1_28"></A><B>INTELLICHECK MOBILISA, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONSOLIDATED STATEMENTS OF OPERATIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Unaudited)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Three Months Ended September 30,</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Nine Months Ended September 30,</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 48%">REVENUES</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">3,218,344</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">2,578,863</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">5,507,434</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">5,932,239</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">COST OF REVENUES</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,202,760</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(797,488</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,013,218</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,295,871</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Gross profit</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,015,584</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,781,375</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,494,216</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,636,368</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">OPERATING EXPENSES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Selling</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">398,035</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">257,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,106,206</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">793,908</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">General and administrative</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">836,841</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,035,941</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,744,225</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,074,299</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Research and development</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">453,022</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">472,711</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,327,376</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,592,056</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Total operating expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,687,898</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,765,652</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,177,807</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,460,263</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Income (loss) from operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">327,686</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">15,723</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,683,591</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,823,895</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">OTHER INCOME (EXPENSE)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Interest income</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">73</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">661</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">88</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Interest expense</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(78</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Other income (expense)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">50</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Net income (loss)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">327,743</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">15,796</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(1,683,008</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(1,823,807</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>PER SHARE INFORMATION</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>Income (loss) per common share -</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Basic</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">0.07</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">0.00</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.35</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.53</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 2.5pt">Diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">0.07</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">0.00</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.35</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.53</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 9pt">Weighted average common shares used in computing per share amounts -</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Basic</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,932,057</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,474,449</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,756,703</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,471,477</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 2.5pt">Diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,945,807</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,480,170</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,756,703</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,471,477</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">See accompanying notes to consolidated financial statements</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;</P>


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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="s1_29"></A><B>INTELLICHECK MOBILISA, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONSOLIDATED STATEMENT OF STOCKHOLDERS&rsquo;
EQUITY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">For the nine months ended September 30,
2014</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Unaudited)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Additional</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Common Stock</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; padding-bottom: 1pt">Paid-in</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; padding-bottom: 1pt">Accumulated</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Shares</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Amount</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Capital</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Deficit</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Total</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 35%">BALANCE, January 1, 2014</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">3,486,557</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">3,487</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">101,008,381</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">(85,655,564</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">15,356,304</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Stock option compensation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,266</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,266</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Issuance of common stock</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,445,500</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,445</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,245,878</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,247,323</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Net loss</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,683,008</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,683,008</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 2.5pt">BALANCE, September 30, 2014</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,932,057</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,932</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">106,264,525</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(87,338,572</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">18,930,885</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">See accompanying notes to consolidated financial statements</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>


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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><A NAME="s1_30"></A>INTELLICHECK MOBILISA, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONSOLIDATED STATEMENTS OF CASH FLOWS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Unaudited)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Nine Months Ended September 30,</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">CASH FLOWS FROM OPERATING ACTIVITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 74%; text-align: left">Net Loss</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">(1,683,008</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">(1,823,807</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Adjustments to reconcile net loss to net cash used in operating activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Depreciation and amortization</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">454,971</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">802,402</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Noncash stock-based compensation expense</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,266</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">27,958</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Changes in assets and liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Decrease (Increase) in accounts receivable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,580,782</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(712,613</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Decrease (Increase) in inventory</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(60,344</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">283,284</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">(Decrease)Increase in other current assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">16,723</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,430</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">(Decrease) Increase in accounts payable, accrued expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">94,874</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">835,518</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">(Decrease)Increase in deferred revenue</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">467,100</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(442,310</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">(Decrease) Increase in deferred rent</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(28,788</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(14,690</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Net cash used in operating activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,308,988</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,039,828</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">CASH FLOWS FROM INVESTING ACTIVITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Purchases of property and equipment</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(95,753</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(73,106</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Net cash used in investing activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(95,753</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(73,106</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">CASH FLOWS FROM FINANCING ACTIVITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 40.5pt">Net proceeds from issuance of common stock from exercise
    of stock options</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,247,323</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">70,472</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Net cash provided by financing activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,247,323</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">70,472</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Net increase in cash and cash equivalents</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,842,582</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,042,462</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">CASH AND CASH EQUIVALENTS, beginning of period</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">224,386</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,685,879</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">CASH AND CASH EQUIVALENTS, end of period</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,066,968</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">643,417</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Supplemental disclosure of noncash investing activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Covenant not to compete (note 10)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">587,500</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">See accompanying notes to consolidated
financial statements</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>I</B><A NAME="s1_31"></A><B>NTELLICHECK
MOBILISA, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Unaudited)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">1.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><U>NATURE
                                         OF BUSINESS</U></FONT></TD>
</TR></TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Business</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Intellicheck Mobilisa is a leading technology
company providing wireless technology and identity systems for various applications, including mobile and handheld access control
and security systems for the government, military and commercial markets. Products include the Fugitive Finder&trade; system,
an advanced ID card access control product currently protecting military bases and secure federal locations; ID Check<SUP>&reg;</SUP>,
a patented technology that instantly reads, analyzes, and verifies encoded data in magnetic stripes and barcodes on government-issued
IDs, designed to improve the Customer Experience for the financial, hospitality and retail sectors; barZapp&trade;, an ID-checking
mobile app that allows a user&rsquo;s smartphone to check an ID card. Wireless products include enterprise wireless system installation
in rural areas of the country.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Reverse Stock Split</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Effective on August 12, 2014 and commencing
with the opening of trading on August 13, 2014, the Company effected a reverse stock split of the issued and outstanding common
stock, $0.001 par value per share, at a ratio of one-for-eight, with each eight (8) issued and outstanding shares of the common
stock automatically combined and converted into one (1) issued and outstanding share of the common stock. The reverse stock split
was approved by stockholders holding a majority of the outstanding voting power at a special meeting of stockholders held on August
12, 2014. All information in the consolidated financial statements and the notes thereto regarding share amounts of the common
stock and prices per share of the common stock has been adjusted to reflect the application of the reverse stock split on a retroactive
basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Principles of Consolidation</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The consolidated financial statements
include the accounts of the Company and its wholly owned subsidiaries, Mobilisa, Inc. (&ldquo;Mobilisa&rdquo;) and Positive Access
Corporation (&ldquo;Positive Access&rdquo;). All intercompany balances and transactions have been eliminated upon consolidation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">2.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><U>SIGNIFICANT
                                         ACCOUNTING POLICIES</U></FONT></TD>
</TR></TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Basis of Presentation</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The accompanying unaudited financial statements
have been prepared in accordance with generally accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and notes required
by generally accepted accounting principles for complete financial statements. In the opinion of management, the unaudited interim
financial statements furnished herein include all adjustments necessary for a fair presentation of the Company&rsquo;s financial
position at September 30, 2014 and the results of its operations for the three and nine months ended September 30, 2014 and 2013,
stockholders&rsquo; equity for the nine months ended September 30, 2014 and cash flows for the nine months ended September 30,
2014 and 2013. All such adjustments are of a normal and recurring nature. Interim financial statements are prepared on a basis
consistent with the Company&rsquo;s annual financial statements. Results of operations for the nine month period ended September
30, 2014, are not necessarily indicative of the operating results that may be expected for the year ending December 31, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The balance sheet as of December 31, 2013
has been derived from the audited financial statements at that date but does not include all of the information and notes required
by accounting principles generally accepted in the United States of America for complete financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">References in this Quarterly Report on
Form 10-Q to &ldquo;authoritative guidance&rdquo; is to the Accounting Standards Codification issued by the Financial Accounting
Standards Board (&ldquo;FASB&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For further information, refer to the
financial statements and notes thereto included in the Company&rsquo;s Annual Report on Form 10-K for the year ended December
31, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0">In May 2014, the FASB
issued a new standard on revenue recognition which outlines a single comprehensive model to use in accounting for revenue arising
from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance.
The core principle of the revenue model is that an entity should recognize revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for
those goods or services. The standard is designed to create greater comparability for financial statement users across industries
and jurisdictions and also requires enhanced disclosures. The guidance is effective for fiscal years, and interim periods within
those years, beginning after December 15, 2016. Early adoption is not permitted. The Company is currently evaluating the impact
of the adoption of this standard on the consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Recent Accounting Pronouncements</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In August 2014, the FASB issued Accounting
Standards Update (&ldquo;ASU&rdquo;) No. 2014-15, &ldquo;Presentation of Financial Statements - Going Concern (Subtopic 205-40):
Disclosure of Uncertainties about an Entity&rsquo;s Ability to Continue as a Going Concern&rdquo; (&ldquo;ASU 2014-15&rdquo;).
ASU 2014-15 is intended to define management&rsquo;s responsibility to evaluate whether there is substantial doubt about an entity&rsquo;s
ability to continue as a going concern and to provide related footnote disclosures. Specifically, ASU 2014-15 provides a definition
of the term substantial doubt and requires an assessment for a period of one year after the date that the financial statements
are issued (or available to be issued). It also requires certain disclosures when substantial doubt is alleviated as a result
of consideration of management&rsquo;s plans and requires an express statement and other disclosures when substantial doubt is
not alleviated. The new standard will be effective for reporting periods beginning after December 15, 2016, with early adoption
permitted. Management is currently evaluating the impact of the adoption of ASU 2014-14 on the consolidated financial statements
and disclosures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Use of Estimates</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The preparation of the Company&rsquo;s
financial statements in conformity with accounting principles generally accepted in the United States of America requires management
to make estimates and assumptions that affect the amounts reported in the Company&rsquo;s financial statements and accompanying
notes. Significant estimates and assumptions that affect amounts reported in the financial statements include impairment of goodwill,
valuation of intangible assets, deferred tax valuation allowances, and the fair value of stock options granted under the Company&rsquo;s
stock-based compensation plans. Due to the inherent uncertainties involved in making estimates, actual results reported in future
periods may be different from those estimates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Cash and Cash Equivalents</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Cash and cash equivalents include cash
and highly liquid investments with original maturities of three months or less when purchased. There were no cash equivalents
held on September 30, 2014 and December 31, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Allowance for Doubtful Accounts</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company records its allowance for
doubtful accounts based upon its assessment of various factors. The Company considers historical experience, the age of the accounts
receivable balances, credit quality of the Company&rsquo;s customers, current economic conditions and other factors that may affect
customers&rsquo; ability to pay.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Inventory</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Inventory is stated at the lower of cost
or market and cost is determined using the first-in, first-out method. Inventory is primarily comprised of finished goods.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Goodwill</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Goodwill represents the excess of acquisition
cost over the fair value of net assets acquired in business combinations. Pursuant to ASC Topic 350, the Company tests goodwill
for impairment on an annual basis in the fourth quarter, or between annual tests, in certain circumstances, such as the occurrence
of operating losses or a significant decline in earnings associated with the asset. The Company evaluates goodwill for impairment
using guidance under ASU 2011-8, which allows the Company to complete a qualitative analysis to determine whether it is necessary
to perform the two step quantitative impairment test.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Intangible Assets</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Acquired intangible assets include primarily
trade names, patents, developed technology and backlog from the acquisition of Mobilisa and Positive Access. The Company uses
the straight line method to amortize these assets over their estimated useful lives. The Company reviews its long-lived assets
for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be fully
recoverable in accordance with ASC Topic 360. To determine recoverability of its long-lived assets, the Company evaluates the
probability that future undiscounted net cash flows, without interest charges, will be less than the carrying amount of the assets.
Impairment is measured at fair value. There were no impairment charges recognized during the nine months ended September 30, 2014
and 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Income Taxes</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company accounts for income taxes
under in accordance with ASC Topic 740, &ldquo;Accounting for Income Taxes.&rdquo; Deferred tax assets and liabilities are recognized
for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases and net operating loss carryforwards. Deferred tax assets and liabilities
are measured using expected tax rates in effect for the year in which those temporary differences are expected to be recovered
or settled. The Company has recorded a full valuation allowance for its net deferred tax assets as of September 30, 2014 and December
31, 2013, due to the uncertainty of the realizability of those assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Financial Instruments</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company adheres to the provisions
of ASC Topic 820, which requires that the Company to calculate the fair value of financial instruments and include this additional
information in the notes to financial statements when the fair value is different than the book value of those financial instruments.
The Company&rsquo;s financial instruments include cash and cash equivalents, accounts receivable, accounts payable and accrued
expenses. At September 30, 2014 and December 31, 2013, the carrying value of the Company&rsquo;s financial instruments approximated
fair value, due to their short-term nature.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Revenue Recognition and Deferred Revenue</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Revenue is generally recognized when persuasive
evidence of an arrangement exists, delivery has occurred, the fee is fixed and determinable, collectability is probable, and there
is no future Company involvement or commitment. The Company sells its commercial products directly through its sales force and
through distributors. Revenue from direct<B>&nbsp;</B>sales of products is recognized when shipped to the customer and title has
passed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Under the provisions of ASC Topic 605-25,
&ldquo;Revenue Arrangements with Multiple Deliverables,&rdquo; for multi-element arrangements that include tangible products containing
software essential to the tangible product&rsquo;s functionality and undelivered software elements relating to the tangible product&rsquo;s
essential software, the Company allocates revenue to all deliverables based on their relative selling prices. In such circumstances,
the Company uses a hierarchy to determine the selling price to be used for allocating revenue to deliverables: (i) vendor-specific
objective evidence of fair value (&ldquo;VSOE&rdquo;), (ii) third-party evidence of selling price and (iii) best estimate of the
selling price (&ldquo;ESP&rdquo;). VSOE generally exists only when the Company sells the deliverable separately and is the price
actually charged by the Company for that deliverable. ESPs reflect the Company&rsquo;s best estimates of what the selling prices
of elements would be if they were sold regularly on a stand-alone basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company also recognizes revenues from
licensing of its patented software to customers. The licensed software requires continuing service or post contractual customer
support and performance; accordingly, a portion of the revenue is deferred based on its fair value and recognized ratably over
the period in which the future service, support and performance are provided, which is generally one to three years. Royalties
from the licensing of the Company&rsquo;s technology are recognized as revenues in the period they are earned.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Revenue from research and development
contracts are generally with government agencies under long-term cost-plus fixed-fee contracts, where revenue is based on time
and material costs incurred. Revenue from these arrangements is recognized as time is spent on the contract and materials are
purchased. Research and development costs are expensed as incurred.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company also performs consulting work
for other companies. These services are billed based on time and materials. Revenue from these arrangements is also recognized
as time is spent on the contract and materials are purchased.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Subscriptions to database information
can be purchased for month-to-month, one, two, and three year periods. Revenue from subscriptions are deferred and recognized
over the contractual period, which is typically three years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company offers enhanced extended warranties
for its sales of hardware and software at a set price. The revenue from these sales are deferred and recognized on a straight-line
basis over the contractual period, which is typically one to four years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Business Concentrations and Credit
Risk </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the three month period ended September
30, 2014, the Company made sales to one customer that accounted for approximately 10% of total revenues. The revenue was associated
with a commercial ID Check sale. This customer represented 1% of total accounts receivable at September 30, 2014. There were no
significant customers for the nine months ended September 30, 2014. During the three and nine month periods ended September 30,
2013, the Company made sales to one customer that accounted for approximately 23% and 21% of total revenues. The revenue was associated
with wireless network installations in Washington State. This customer represented 24% of total accounts receivable at September
30, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Net Income (Loss) Per Share</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Basic net income (loss) per share is computed
by dividing the net income (loss) for the period by the weighted average number of common shares outstanding during the period.
Diluted net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number
of shares of common stock and potentially dilutive common stock outstanding during the period. The dilutive effect of outstanding
options and restricted stock is reflected in diluted earnings per share by application of the treasury stock method. The calculation
of diluted net income (loss) per share excludes all anti-dilutive shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center">Three Months Ended</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center">Nine Months Ended</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">September 30,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">September 30,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2014</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2014</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>Numerator:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 48%; text-align: left; padding-bottom: 2.5pt">Net income (loss)</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 2.5pt double; text-align: right">327,743</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 2.5pt double; text-align: right">15,796</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 2.5pt double; text-align: right">(1,683,008</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 2.5pt double; text-align: right">(1,823,807</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Denominator:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>Weighted average common shares &ndash; basic</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,932,057</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,474,449</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,756,703</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,471,477</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Dilutive effect of equity incentive plans</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">13,750</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,721</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 2.5pt">Weighted average common shares &ndash; diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,945,807</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,480,170</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,756,703</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,471,477</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>Net income (loss) per share</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Basic</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">0.07</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">0.00</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.35</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.53</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 2.5pt">Diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">0.07</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">0.00</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.35</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.53</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following table summarizes the common
stock equivalents excluded from income (loss) per diluted share because their effect would be anti-dilutive:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center">Three Months Ended</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center">Nine Months Ended</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">September 30,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">September 30,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2014</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2014</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 48%">Warrants</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">64,981</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">64,891</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Stock options</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">61,728</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">141,372</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">75,478</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">126,841</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">126,709</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">141,372</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">140,369</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">126,841</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The above listing is not intended to be
a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is
specifically dictated by generally accepted accounting principles, with no need for management's judgment in their application.
There are also areas in which management's judgment in selecting any available alternative would not produce a materially different
result.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left">3.</TD><TD STYLE="text-align: justify"><U>INTANGIBLE ASSETS</U></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following summarizes amortization
of acquisition related intangible assets included in the statement of operations:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center">Three Months Ended</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center">Nine Months Ended</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">September 30,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">September 30,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2014</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2014</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 48%">Cost of sales</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">59,163</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">192,854</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">242,354</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">578,562</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">General and administrative</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">28,785</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">33,952</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">96,688</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">101,855</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">87,948</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">226,806</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">339,042</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">680,417</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On September 30, 2014 the Company entered
into a non-compete agreement, amounting to $578,500 which has been capitalized as an intangible asset. (Note 10)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left">4.</TD><TD STYLE="text-align: justify"><U>REVOLVING LINE
                                         OF CREDIT</U></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company entered into a revolving credit
facility with Silicon Valley Bank. On October 15, 2014, this facility was renewed for an additional year. The maximum borrowing
under the facility is $2 million. Borrowings under the facility are subject to certain limitations based on a percentage of accounts
receivable, as defined in the agreement, and are secured by all of the Company&rsquo;s assets. The facility bears interest at
a rate of U.S. prime (3.25% at September 30, 2014) plus 1.25% - 1.75%, depending on the Company&rsquo;s cash plus availability.
Interest is payable monthly and the principal is due upon maturity on October 15, 2015. At September 30, 2014, there were no amounts
outstanding, and unused availability under the facility was approximately $658,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The facility contains a tangible net worth
covenant requiring that, as of each monthly reporting, total assets minus intangible assets minus capitalized software development
costs minus total liabilities plus subordinated debt is at least equal to $1,948,400, starting October 15, 2014, and increasing
immediately by 50% for new debt or equity received and 50% of quarterly net income (with no reduction for losses).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left">5.</TD><TD STYLE="text-align: justify"><U>INCOME TAXES</U></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of September 30, 2014, the Company
had net operating loss carryforwards (NOL&rsquo;s) for federal and New York state income tax purposes of approximately $41 million.
There can be no assurance that the Company will realize any benefit of the NOL&rsquo;s. The federal and New York state NOL&rsquo;s
are available to offset future taxable income and expire from 2018 through 2030 if not utilized. Under Section 382 of the Internal
Revenue Code, these NOL&rsquo;s may be limited due to ownership changes. The Company has not yet completed its review to determine
whether or not these NOL&rsquo;s will be limited under Section 382 of the Internal Revenue Code due to the ownership change from
the acquisition of Mobilisa, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company has recorded a full valuation
allowance against its net deferred assets since management believes that it is more likely than not that these assets will not
be realized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The effective tax rate for the nine months
ended September 30, 2014 and 2013 is different from the tax benefit that would result from applying the statutory tax rates primarily
due to the recognition of valuation allowances.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left">6.</TD><TD STYLE="text-align: justify"><U>SHARE BASED
                                         COMPENSATION</U></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company accounts for the issuance
of equity awards to employees in accordance with ASC Topic 718 and 505, which requires that the cost resulting from all share
based payment transactions be recognized in the financial statements. These pronouncements establish fair value as the measurement
objective in accounting for share based payment arrangements and requires all companies to apply a fair value based measurement
method in accounting for all share based payment transactions with employees.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">All stock-based compensation is included
in operating expenses for the periods as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center">Three Months Ended</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center">Nine Months Ended</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">September 30,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">September 30,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2014</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2014</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Compensation cost recognized:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 48%">Selling</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">13,100</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">General &amp; Administrative</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,928</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,761</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,927</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,923</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Research &amp; Development</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">757</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,538</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,339</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">9,935</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">5,685</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">5,299</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">10,266</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">27,958</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Stock option activity under the 1998,
1999, 2001, 2003 and 2006 Stock Option Plans during the periods indicated below were as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: justify">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Number of<BR> Shares<BR>
    Subject to<BR> Issuance</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Weighted-<BR> average<BR>
    Exercise<BR> Price</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Weighted-<BR> average<BR> Remaining<BR>
    Contractual<BR> Term</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Aggregate<BR> Intrinsic<BR>
    Value</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 48%">Outstanding at December 31, 2013</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">40,936</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">18.48</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 12%; text-align: center">2.42 years</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">12,100</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: justify">Granted</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">43,622</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4.58</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify">Forfeited or expired</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(9,080</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">11.79</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: justify">Exercised</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify; padding-bottom: 2.5pt">Outstanding at September 30, 2014</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">75,478</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">11.27</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: center; border-bottom: Black 2.5pt double">3.75 years</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">11,138</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: justify">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify; padding-bottom: 2.5pt">Exercisable at September 30, 2014</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">21,544</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">28.70</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: center; border-bottom: Black 2.5pt double">1.58 years</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,784</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The aggregate intrinsic value in the table
above represents the total pretax intrinsic value (the difference between the Company&rsquo;s closing stock price on the last
trading day of the period and the exercise price, multiplied by the number of in-the-money options) that would have been received
by the option holders had they all exercised their options on September 30, 2014. This amount changes based upon the fair market
value of the Company&rsquo;s stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of September 30, 2014, there was $324,990
of total unrecognized compensation expense, net of estimated forfeitures, related to all unvested stock options and restricted
stock, which is expected to be recognized over a weighted-average period of 2.99 years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of September 30, 2014, the Company
had 438,130 options available for future grants under the Plans. The Company uses the Black-Scholes option pricing model to
value the options. The Company issued 34,351 shares of restricted stock units during the quarter ended September 30, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left">7.</TD><TD STYLE="text-align: justify"><U>ISSUANCE OF
                                         COMMON STOCK</U></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 14, 2014, the Company completed
a public offering of 1,118,375 shares of common stock at a price to the public of $3.60 per share. The number of shares the Company
sold includes the underwriters&rsquo; full exercise of their over-allotment option of 145,875 shares. Net proceeds to the Company
from the offering, before expenses, were approximately $3,644,000. The underwriter received a warrant to purchase 48,625 shares
of common stock, at the price of $4.48 (125% of the price of the shares sold in the offering), which will be exercisable one year
after the date of the offering and will expire on the fifth anniversary of that offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On April 10, 2014, the Company completed
a public offering of 327,125 shares of common stock at a price to the public of $6.40 per share. Net proceeds to the Company from
the offering, before expenses, were approximately $2,094,000. The underwriter received a warrant to purchase 16,356 shares of
common stock, at a price of $8.00 per share (125% of the price of the shares sold in the offering), which will be exercisable
one year after the date of the offering and will expire on the fifth anniversary of that offering. The underwriter and certain
directors and officers waived the right to exercise an aggregate of 93,407 stock options and warrants until a future date yet
to be determined.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left">8.</TD><TD STYLE="text-align: justify"><U>LEGAL PROCEEDINGS</U></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company is not aware of any infringement
by the Company&rsquo;s products or technology on the proprietary rights of others.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company is not currently involved
in any legal or regulatory proceeding, or arbitration, the outcome of which is expected to have a material adverse effect on its
business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left">9.</TD><TD STYLE="text-align: justify"><U>COMMITMENTS
                                         AND CONTINGENCIES</U></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In March 2009, the Company entered into
an agreement with an investor relations firm. The agreement is automatically renewed for successive twelve month periods unless
either party gives written notice no later than 30 days prior to the expiration period. Afterwards, the fee may be subject to
change by mutual agreement of the parties. As of April 1, 2011, the fee was reduced to $10,000 per month.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left">10.</TD><TD STYLE="text-align: justify"><U>RELATED PARTY
                                         TRANSACTIONS</U></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Mobilisa leases office space from an entity
that is wholly-owned by two former directors, who are also former members of management. The Company entered into a 10-year lease
for the office space ending in 2017. The annual rent for this facility is currently $85,498 and is subject to annual increases
based on the increase in the CPI index plus 1%. The Company is a guarantor of the leased property. For the three and nine months
ended September 30, 2014, total rental payments for this office space were $22,075 and $66,226, respectively. For the three and
nine months ended September 30, 2013, total rental payments for this office space were $22,075 and $66,226, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On September 30, 2014, the CEO and a Senior
Vice President (collectively, the &ldquo;Executives&rdquo;), who were also board members, retired from the Company and simultaneously
resigned from the board of directors. In connection with the separation, the Company entered into a separation and consulting
agreement with the Executives. Included as part of the arrangement, the Company committed to payments totaling $587,500 to be
made over a period of 15 months. In exchange for the consideration, the Executives agreed not to compete with the Company, solicit
any employee, contractor or consultant of the Company to terminate employment or contractual relationship with the Company, as
well refrain from other activities, as defined in the agreement. There is a renewal option contained in each agreement, which
must be mutually agreed to, for an additional nine month period commencing on January 1, 2015 in exchange for aggregate monthly
payments of $27,500. At September 30, 2014, the Company recorded the future payments of the agreement as a liability and as a
non-compete intangible asset totaling $587,500. The costs of the non-compete will be amortized over the term of the agreement
(15 months). There was no amortization expense recognized for the three or nine months ended September 30, 2014. The Company made
a lump sum payment of $87,500 on October 1, 2014, will make a payment of $87,500 January 1, 2015, and will make 15 monthly payments
of $27,500 beginning on November 1, 2014 as a result of entering into the agreements with the Executives.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of September 30, 2014, the Company
had $0 in accrued expenses related to board fees for the first three quarters of 2014. The Company and directors entered into
an agreement to take restricted stock units and stock options in lieu of a portion of the cash payments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in"></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><A NAME="s1_26"></A><B>REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Board of Directors and Stockholders of</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9pt">Intellicheck Mobilisa, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have audited the accompanying consolidated balance sheets
of Intellicheck Mobilisa, Inc. (the &ldquo;Company&rdquo;) as of December 31, 2013 and 2012, and the related consolidated statements
of operations, stockholders&rsquo; equity, and cash flows for each of the years in the two-year period ended December 31, 2013.
These consolidated financial statements are the responsibility of the Company&rsquo;s management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We conducted our audits 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, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits 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&rsquo;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 financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the consolidated financial position of Intellicheck Mobilisa, Inc. as of December
31, 2013 and 2012, and the consolidated results of its operations and its cash flows for each of the years in the two-year period
ended December 31, 2013, in conformity with accounting principles generally accepted in the United States of America.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD NOWRAP STYLE="width: 1%; border-bottom: Black 1pt solid"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">/s/ EisnerAmper
    LLP</FONT></TD>
    <TD STYLE="width: 99%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD NOWRAP>December 19<FONT STYLE="font: 10pt Times New Roman, Times, Serif">, 2014</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD NOWRAP><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Iselin, NJ</FONT></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><A NAME="s1_32"></A><B>INTELLICHECK MOBILISA, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2013 and 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-decoration: underline; text-align: center">ASSETS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">CURRENT ASSETS:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt; width: 74%">Cash and cash equivalents</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">224,386</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">1,685,879</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 9pt">Accounts receivable, net of allowance of $0 and $1,613</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,041,519</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">869,747</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9pt">Inventory</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">54,677</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">337,559</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Other current assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">107,519</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">105,881</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.25in">Total current assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,428,101</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,999,066</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">PROPERTY AND EQUIPMENT, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">369,095</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">449,438</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>GOODWILL</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,308,661</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,308,661</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">INTANGIBLE ASSETS, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,724,354</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,631,577</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">OTHER ASSETS</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">72,006</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">72,006</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.25in">Total assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">17,902,217</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">20,460,748</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-decoration: underline; text-align: center">LIABILITIES AND STOCKHOLDERS&rsquo; EQUITY</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">CURRENT LIABILITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 9pt">Accounts payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">478,588</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">247,289</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Accrued expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">701,928</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">556,814</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Deferred revenue, current portion</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">967,912</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,450,923</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.25in">Total current liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,148,428</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,255,026</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">OTHER LIABILITIES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 9pt">Deferred revenues, long-term portion</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">233,732</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">341,948</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Deferred rent</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">163,753</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">185,339</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.25in">Total liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,545,913</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,782,313</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">STOCKHOLDERS' EQUITY:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 9pt">Common stock &ndash; $.001 par value&#894; 40,000,000 shares authorized&#894;
    3,487,183 and <BR> 3,465,533 shares issued and outstanding as of 2013 and 2012, respectively</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,487</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,466</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Additional paid-in capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">101,008,381</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">100,906,277</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Accumulated deficit</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(85,655,564</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(83,231,308</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Total stockholders&rsquo; equity</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">15,356,304</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">17,678,435</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.25in">Total liabilities and stockholders&rsquo; equity</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">17,902,217</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">20,460,748</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The accompanying notes are an integral part of these consolidated
statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><A NAME="s1_33"></A><B>INTELLICHECK MOBILISA, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">CONSOLIDATED STATEMENTS OF OPERATIONS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="color: Red; font-weight: normal; padding-bottom: 1pt; font-style: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="color: Red; font-weight: normal; text-align: center; border-bottom: Black 1pt solid; font-style: normal"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif; color: Black">2013</FONT></TD><TD STYLE="padding-bottom: 1pt; color: Red; font-weight: normal; font-style: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">2012</FONT></TD><TD STYLE="padding-bottom: 1pt; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; font-style: normal; font-weight: normal">
    <TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255); font-style: normal; font-weight: normal">
    <TD STYLE="width: 74%; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">REVENUES</FONT></TD><TD STYLE="width: 1%; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">$</FONT></TD><TD STYLE="width: 10%; text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">7,298,537</FONT></TD><TD STYLE="width: 1%; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="width: 1%; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">$</FONT></TD><TD STYLE="width: 10%; text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">8,803,217</FONT></TD><TD STYLE="width: 1%; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White; font-style: normal; font-weight: normal">
    <TD STYLE="padding-bottom: 1pt; padding-left: 0; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">COST
    OF REVENUES</FONT></TD><TD STYLE="padding-bottom: 1pt; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">(2,772,984</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">)</FONT></TD><TD STYLE="padding-bottom: 1pt; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">(3,001,997</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255); font-style: normal; font-weight: normal">
    <TD STYLE="text-align: left; padding-left: 0.25in; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">Gross
    profit</FONT></TD><TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">4,525,553</FONT></TD><TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">5,801,220</FONT></TD><TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White; font-style: normal; font-weight: normal">
    <TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255); font-style: normal; font-weight: normal">
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">OPERATING EXPENSES</FONT></TD><TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White; font-style: normal; font-weight: normal">
    <TD STYLE="color: Red; font-weight: normal; font-style: normal; padding-left: 0.125in"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif; color: Black">Selling</FONT></TD><TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">1,096,486</FONT></TD><TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">1,613,819</FONT></TD><TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255); font-style: normal; font-weight: normal">
    <TD STYLE="text-align: left; padding-left: 9pt; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">General
    and administrative</FONT></TD><TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">3,796,735</FONT></TD><TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">4,209,385</FONT></TD><TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White; font-style: normal; font-weight: normal">
    <TD STYLE="color: Red; font-weight: normal; text-align: left; padding-bottom: 1pt; font-style: normal; padding-left: 0.125in"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif; color: Black">Research
    and development</FONT></TD><TD STYLE="padding-bottom: 1pt; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">2,056,744</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">2,239,011</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255); font-style: normal; font-weight: normal">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.25in; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">Total
    operating expenses</FONT></TD><TD STYLE="padding-bottom: 1pt; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">6,949,965</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">8,062,215</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White; font-style: normal; font-weight: normal">
    <TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255); font-style: normal; font-weight: normal">
    <TD STYLE="color: Red; font-weight: normal; text-align: left; font-style: normal; padding-left: 0.25in"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif; color: Black">Loss
    from operations</FONT></TD><TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">(2,424,412</FONT></TD><TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">)</FONT></TD><TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">(2,260,995</FONT></TD><TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White; font-style: normal; font-weight: normal">
    <TD STYLE="color: Red; font-weight: normal; text-align: left; font-style: normal; padding-left: 0.25in">&nbsp;</TD><TD STYLE="font-style: normal; font-weight: normal">&nbsp;</TD>
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal">&nbsp;</TD><TD STYLE="text-align: right; font-style: normal; font-weight: normal">&nbsp;</TD><TD STYLE="text-align: left; font-style: normal; font-weight: normal">&nbsp;</TD><TD STYLE="font-style: normal; font-weight: normal">&nbsp;</TD>
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal">&nbsp;</TD><TD STYLE="text-align: right; font-style: normal; font-weight: normal">&nbsp;</TD><TD STYLE="text-align: left; font-style: normal; font-weight: normal">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255); font-style: normal; font-weight: normal">
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">OTHER INCOME</FONT></TD><TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White; font-style: normal; font-weight: normal">
    <TD STYLE="color: Red; font-weight: normal; text-align: left; font-style: normal; padding-left: 0.125in"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif; color: Black">Interest
    income</FONT></TD><TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">156</FONT></TD><TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">909</FONT></TD><TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255); font-style: normal; font-weight: normal">
    <TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White; font-style: normal; font-weight: normal">
    <TD STYLE="color: Red; font-weight: normal; text-align: left; padding-bottom: 2.5pt; padding-left: 0; font-style: normal"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif; color: Black">Net
    loss</FONT></TD><TD STYLE="padding-bottom: 2.5pt; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">(2,424,256</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">)</FONT></TD><TD STYLE="padding-bottom: 2.5pt; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">(2,260,086</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255); font-style: normal; font-weight: normal">
    <TD STYLE="color: Red; font-weight: normal; text-align: left; padding-left: 0; font-style: normal">&nbsp;</TD><TD STYLE="font-style: normal; font-weight: normal">&nbsp;</TD>
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal">&nbsp;</TD><TD STYLE="text-align: right; font-style: normal; font-weight: normal">&nbsp;</TD><TD STYLE="text-align: left; font-style: normal; font-weight: normal">&nbsp;</TD><TD STYLE="font-style: normal; font-weight: normal">&nbsp;</TD>
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal">&nbsp;</TD><TD STYLE="text-align: right; font-style: normal; font-weight: normal">&nbsp;</TD><TD STYLE="text-align: left; font-style: normal; font-weight: normal">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White; font-style: normal; font-weight: normal">
    <TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">PER SHARE INFORMATION:</FONT></TD><TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255); font-style: normal; font-weight: normal">
    <TD STYLE="padding-left: 9pt; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">Net loss per common share</FONT></TD><TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White; font-style: normal; font-weight: normal">
    <TD STYLE="color: Red; font-weight: normal; padding-bottom: 2.5pt; font-style: normal; padding-left: 0.25in"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif; color: Black">Basic</FONT></TD><TD STYLE="padding-bottom: 2.5pt; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">(0.70</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">)</FONT></TD><TD STYLE="color: red; padding-bottom: 2.5pt; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: red; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; color: red; text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">(0.65</FONT></TD><TD STYLE="padding-bottom: 2.5pt; color: red; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255); font-style: normal; font-weight: normal">
    <TD STYLE="padding-bottom: 2.5pt; padding-left: 0.25in; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">Diluted</FONT></TD><TD STYLE="padding-bottom: 2.5pt; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">(0.70</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">)</FONT></TD><TD STYLE="color: red; padding-bottom: 2.5pt; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: red; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; color: red; text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">(0.65</FONT></TD><TD STYLE="padding-bottom: 2.5pt; color: red; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White; font-style: normal; font-weight: normal">
    <TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255); font-style: normal; font-weight: normal">
    <TD STYLE="padding-left: 9pt; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">Weighted
    average common shares used in computing per share amounts</FONT></TD><TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White; font-style: normal; font-weight: normal">
    <TD STYLE="color: Red; font-weight: normal; padding-bottom: 2.5pt; font-style: normal; padding-left: 0.25in"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif; color: Black">Basic</FONT></TD><TD STYLE="color: red; padding-bottom: 2.5pt; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: red; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; color: red; text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">3,487,183</FONT></TD><TD STYLE="padding-bottom: 2.5pt; color: red; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="color: red; padding-bottom: 2.5pt; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: red; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; color: red; text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">3,465,533</FONT></TD><TD STYLE="padding-bottom: 2.5pt; color: red; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255); font-style: normal; font-weight: normal">
    <TD STYLE="padding-bottom: 2.5pt; padding-left: 0.25in; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">Diluted</FONT></TD><TD STYLE="color: red; padding-bottom: 2.5pt; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: red; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; color: red; text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">3,487,183</FONT></TD><TD STYLE="padding-bottom: 2.5pt; color: red; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="color: red; padding-bottom: 2.5pt; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: red; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; color: red; text-align: right; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">3,465,533</FONT></TD><TD STYLE="padding-bottom: 2.5pt; color: red; text-align: left; font-style: normal; font-weight: normal"><FONT STYLE="font-weight: normal; font-style: normal; color: Black">&nbsp;</FONT></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The accompanying notes are an integral part of these consolidated
statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><A NAME="s1_34"></A><B>INTELLICHECK MOBILISA, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">CONSOLIDATED STATEMENTS OF STOCKHOLDERS&rsquo; EQUITY</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">FOR THE
YEARS ENDED DECEMBER 31, 2012 AND 2013</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt">Additional</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="6" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 10pt">Common Stock</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 10pt">Paid-in</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 10pt">Accumulated</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">Shares</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">Amount</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">Capital</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">Deficit</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">Total</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 35%"><FONT STYLE="font-size: 10pt">BALANCE, December 31, 2011</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">3,432,813</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 10pt">$</FONT></TD><TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">3,433</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 10pt">$</FONT></TD><TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">100,723,185</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 10pt">$</FONT></TD><TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">(80,971,222</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 10pt">)</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 10pt">$</FONT></TD><TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">19,755,396</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">Stock based compensation expense (employees and directors)</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">52,677</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">52,677</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 10pt">Exercise of stock options</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">32,720</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">33</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">130,415</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">130,448</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">Net loss</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">(2,260,086</FONT></TD><TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">(2,260,086</FONT></TD><TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD><FONT STYLE="font-size: 10pt">BALANCE, December 31, 2012</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">3,465,533</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">3,466</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">100,906,277</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(83,231,308</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">)</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">17,678,435</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">Stock based compensation expense (employees and directors)</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">19,053</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">19,053</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 10pt">Exercise of stock options</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">19,150</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">19</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">70,453</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">70,472</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">Issuance of common stock</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2,500</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">12,598</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">12,600</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">Net loss</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(2,424,256</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 10pt">)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(2,424,256</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 10pt">BALANCE, December 31, 2013</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 10pt">3,487,183</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 10pt">3,487</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 10pt">101,008,381</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 10pt">(85,655,564</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 10pt">)</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 10pt">15,356,304</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The accompanying notes are an integral part of these consolidated
statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><A NAME="s1_35"></A><B>INTELLICHECK MOBILISA, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">CONSOLIDATED STATEMENTS OF CASH FLOWS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 5.05pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">CASH FLOWS FROM OPERATING ACTIVITIES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 74%; text-align: left">Net loss</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">(2,424,256</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">(2,260,086</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Adjustments to reconcile net loss to net cash (used in) provided by operating activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 0.25in">Depreciation and amortization</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,068,408</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,094,173</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.25in">Non cash stock based compensation expense</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">31,653</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">52,677</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 0.125in">Provision for doubtful accounts</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,271</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Changes in assets and liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 0.25in">(Increase) decrease in accounts receivable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(171,772</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,192,312</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.25in">Decrease (increase) in inventory</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">282,882</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(325,665</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 0.25in">(Increase) decrease in other current assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,637</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,888</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.25in">Increase (decrease) in accounts payable and accrued expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">376,413</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(92,823</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 0.25in">(Decrease) in deferred revenue</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(591,227</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(305,200</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.25in">(Decrease) in deferred rent</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(21,587</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(9,420</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.375in">Net cash (used in) provided by operating activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,451,123</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">345,585</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">CASH FLOWS FROM INVESTING ACTIVITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.125in">Purchases of property and equipment</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(80,842</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(184,303</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 27pt">Net cash (used in) investing activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(80,842</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(184,303</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">CASH FLOWS FROM FINANCING ACTIVITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.25in">Net proceeds from issuance of common stock from exercise of stock options and warrants</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">70,472</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">130,448</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.375in">Net cash provided by financing activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">70,472</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">130,448</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 0.375in">Net (decrease) increase in cash and cash equivalents</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,461,493</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">291,730</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">CASH AND CASH EQUIVALENTS, beginning of year</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,685,879</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,394,148</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">CASH AND CASH EQUIVALENTS, end of year</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">224,386</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,685,878</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The accompanying notes are an integral part of these consolidated
statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><B>INTELLICHECK MOBILELISA,
INC,</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><B>NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">1. <U><A NAME="s1_36"></A>NATURE OF BUSINESS</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Business</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Intellicheck Mobilisa, Inc. (the &ldquo;Company&rdquo; or &ldquo;Intellicheck&rdquo;)
is a leading technology company that is engaged in developing, integrating and marketing wireless technology and identity systems
for various applications including mobile and handheld access control and security systems for the government, military and commercial
markets. Products include the Defense ID and Fugitive Finder systems, advanced ID card access control products currently protecting
military and federal locations, and ID-Check, a patented technology that instantly reads, analyzes, and verifies encoded data
in magnetic stripes and barcodes on government-issue IDs from U.S. and Canadian jurisdictions designed to improve the Customer
Experience for the financial, hospitality and retail sectors. Wireless products and services include Aegeus, a wireless security
buoy system for the government, military and oil industry. The company is also engaged in the engineering, design and installation
of wireless communications systems.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Reverse Stock Split</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Effective on August 12, 2014 and commencing with the opening
of trading on August 13, 2014, the Company effected a reverse stock split of the issued and outstanding common stock, $0.001 par
value per share, at a ratio of one-for-eight, with each eight (8) issued and outstanding shares of the common stock automatically
combined and converted into one (1) issued and outstanding share of the common stock. The reverse stock split was approved by stockholders
holding a majority of the outstanding voting power at a special meeting of stockholders held on August 12, 2014. All information
in the consolidated financial statements and the notes thereto regarding share amounts of the common stock and prices per share
of the common stock has been adjusted to reflect the application of the reverse stock split on a retroactive basis.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Principles of Consolidation</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The consolidated financial statements include the accounts
of the Company and its wholly owned subsidiaries, Mobilisa, Inc. (&ldquo;Mobilisa&rdquo;) and Positive Access Corporation (&ldquo;Positive
Access&rdquo;). All intercompany balances and transactions have been eliminated upon consolidation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">2. <U>SIGNIFICANT ACCOUNTING POLICIES</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Cash and Cash Equivalents</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Cash and cash equivalents include cash and highly liquid investments
with original maturities of three months or less when purchased. As of December 31, 2013 and 2012, cash equivalents were $0 and
$0, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Allowance for Doubtful Accounts</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company records its allowance for doubtful accounts based
upon its assessment of various factors. The Company considers historical experience, the age of the accounts receivable balances,
credit quality of the Company&rsquo;s customers, current economic conditions and other factors that may affect customers&rsquo;
ability to pay.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Inventory</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Inventory is stated at the lower of cost or market and cost
is determined using the first-in, first-out method. Inventory is primarily comprised of finished goods. As of December 31, 2013,
the majority of our inventory related to Government and Commercial Identity products for intended near- term sales.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Long-Lived Assets and Impairment of Long-Lived Assets</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&rsquo;s long-lived assets
include property and equipment, goodwill and intangible assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company reviews its long-lived assets
for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be fully
recoverable in accordance with SFAS No. 144, &ldquo;Accounting for Impairment or Disposal of Long-Lived Assets&rdquo; and SFAS
142, &ldquo;Goodwill and other Intangible Assets&rdquo; (ASC Topic 360). To determine recoverability of its long-lived assets,
the Company evaluates the probability that future undiscounted net cash flows, without interest charges, will be less than the
carrying amount of the assets. Impairment is measured at fair value. No impairments were recognized during the years ended December
31, 2013 or 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Property and Equipment</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Property and equipment are recorded at cost and are depreciated
over their estimated useful lives ranging from three to ten-years using the straight- line method. Leasehold improvements are
amortized utilizing the straight-line method over the lesser of the term of the lease or estimated useful life of the asset.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Goodwill</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Goodwill represents the excess of acquisition cost over the
fair value of net assets acquired in business combinations. Pursuant to ASC Topic 350, the Company tests goodwill for impairment
on an annual basis in the fourth quarter, or between annual tests, in certain circumstances. Under guidance, the Company first
assessed qualitative factors to determine whether it was necessary to perform the two-step quantitative goodwill impairment test.
An entity is not required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative
assessment, that it is more likely than not that its fair value is less than its carrying amount. Events or changes in circumstances
which could trigger an impairment review include macroeconomic conditions, industry and market conditions, cost factors, overall
financial performance, other entity specific events and sustained decrease in share price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company determined that a two-step quantitative analysis
was necessary for both years ended December 31, 2013 and 2012.See Note 5 and Management&rsquo;s Discussion and Analysis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Intangible Assets</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Acquired intangible assets include trade names, patents, developed
technology and backlog described more fully in Note 5. The Company uses the straight line method to amortize these assets over
their estimated useful lives. The Company reviews its long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of these assets may not be fully recoverable in accordance with ASC Topic 360. To determine
recoverability of its long-lived assets, the Company evaluates the probability that future undiscounted net cash flows, without
interest charges, will be less than the carrying amount of the assets. Impairment is measured at fair value. No impairments were
recognized during the years ended December 31, 2013 and 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Costs of Computer Software Developed or Obtained for Internal
Use</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company accounts for certain software costs under ASC Topic
350, which provides guidance for determining whether computer software is internal-use software and guidance on accounting for
the proceeds of computer software originally developed or obtained for internal use and then subsequently sold to the public.
It also provides guidance on capitalization of the costs incurred for computer software developed or obtained for internal use.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Capitalized Software Development Costs</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Costs incurred internally in creating a computer software product
shall be charged to expense when incurred as research and development until technological feasibility has been established for
the product. Software production costs for computer software that is to be used as an integral part of a product or process shall
not be capitalized until both (a) technological feasibility has been established for the software and (b) all research and development
activities for the other components of the product or process have been completed. The Company has not capitalized any software
costs for the years ended December 31, 2013 and 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Deferred Rent</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company received certain rent abatements and incentives
from landlords as an inducement to move into its New York office facility. In accordance with ASC Topic 840, the Company is amortizing
these incentives on a straight line basis over the periods of the respective leases.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Revenue Recognition and Deferred Revenue</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Revenue is generally recognized when persuasive evidence of
an arrangement exists, delivery has occurred, the fee is fixed and determinable, collectability is probable, and there is no future
Company involvement or commitment. The Company sells its commercial products directly through its sales force and through distributors.
Revenue from direct sales of products is recognized when shipped to the customer and title has passed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Under the provisions of ASC Topic 605-25, &ldquo;Revenue Arrangements
with Multiple Deliverables,&rdquo; for multi-element arrangements that include tangible products containing software essential
to the tangible product&rsquo;s functionality and undelivered software elements relating to the tangible product&rsquo;s essential
software, the Company allocates revenue to all deliverables based on their relative selling prices. In such circumstances, the
Company uses a hierarchy to determine the selling price to be used for allocating revenue to deliverables: (i) vendor-specific
objective evidence of fair value (&ldquo;VSOE&rdquo;), (ii) third-party evidence of selling price and (iii) best estimate of the
selling price (&ldquo;ESP&rdquo;). VSOE generally exists only when the Company sells the deliverable separately and is the price
actually charged by the Company for that deliverable. ESPs reflect the Company&rsquo;s best estimates of what the selling prices
of elements would be if they were sold regularly on a stand-alone basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company also recognizes revenues from licensing of its
patented software to customers. The licensed software requires continuing service or post contractual customer support and performance&#894;
accordingly, a portion of the revenue is deferred based on its fair value and recognized ratably over the period in which the
future service, support and performance are provided, which is generally one to three years. Royalties from the licensing of the
Company&rsquo;s technology are recognized as revenues in the period they are earned.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Revenue from research and development
contracts are generally with government agencies under long-term cost-plus fixed-fee contracts, where revenue is based on time
and material costs incurred. Revenue from these arrangements is recognized as time is spent on the contract and materials are
purchased. Research and development costs are expensed as incurred.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company also performs consulting work for other companies.
These services are billed based on time and materials. Revenue from these arrangements is also recognized as time is spent on
the contract and materials are purchased.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Subscriptions to database information can be purchased for
month-to-month, one, two, and three year periods. Revenue from subscriptions are deferred and recognized over the contractual
period, which is typically three years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company offers enhanced extended warranties for its sales
of hardware and software at a set price. The revenue from these sales are deferred and recognized on a straight-line basis over
the contractual period, which is typically one to three years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Research and Development Costs</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Research and development costs are charged to expense as incurred.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Shipping Costs</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company&rsquo;s shipping and handling costs are included
in cost of revenues for all periods presented.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Income Taxes</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company accounts for income taxes under in accordance with
ASC Topic 740, &ldquo;Accounting for Income Taxes.&rdquo; Deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases and net operating loss carryforwards. Deferred tax assets and liabilities are measured using expected
tax rates in effect for the year in which those temporary differences are expected to be recovered or settledT. he Company has
recorded a full valuation allowance for its net deferred tax assets as of December 31, 2013 and 2012, due to the uncertainty of
the realizability of those assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Fair Value of Financial Instruments</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company adheres to the provisions
of SFAS No. 107, &ldquo;Disclosures about Fair Value of Financial Instruments&rdquo; (ASC Topic 820). This pronouncement requires
that the Company calculate the fair value of financial instruments and include this additional information in the notes to financial
statements when the fair value is different than the book value of those financial instruments. The Company&rsquo;s financial
instruments include cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and notes payable.At December
31, 2013 and 2012, the carrying value of the Company&rsquo;s financial instruments approximated fair value, due to their short-term
nature.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Business Concentrations and Credit
Risk</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Financial instruments, which subject the
Company to concentrations of credit risk, consist primarily of cash and cash equivalents. The Company maintains cash between three
financial institutions. The cash equivalents consist of money market funds. The Company performs periodic evaluations of the relative
credit standing of these institutions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&rsquo;s sales are principally
made to large retail customers, financial institutions concentrated in the United States of America and to U.S. government entities.
The Company performs ongoing credit evaluations, generally does not require collateral, and establishes an allowance for doubtful
accounts based upon factors surrounding the credit risk of customers, historical trends and other information. During the years
ended December 31, 2013 and 2012, the Company had one and three customers that accounted for approximately 17% and 40% of total
revenues, respectively. The revenue resulted from wireless network installations in Washington State. These customers represented
12% and 5% of total accounts receivable at December 31, 2013 and 2012, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2013, the Company had
three suppliers for the production of its input devices. T he Company has modified its software to operate in windows based systems
and can integrate with different hardware platforms that are readily available in the marketplace. T he Company does not maintain
a manufacturing facility of its own and is not dependent on maintaining its production relationships due to the flexibility of
its software to run on multiple existing platforms.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Net Loss and Net Loss Per Share</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Basic net income (loss) per share is computed by dividing the
net income (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted net income
(loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of shares of common
stock and potentially dilutive common stock outstanding during the period. The dilutive effect of outstanding options and restricted
stock is reflected in diluted earnings per share by application of the treasury stock method. The calculation of diluted net income
(loss) per share excludes all anti-dilutive shares. The following table sets forth the computation of basic and diluted net income
(loss) per share for the periods indicated:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table summarizes the common stock equivalents
excluded from loss per diluted share because their effect would be anti-dilutive:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 74%; text-align: left">Stock options</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">40,936</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">93,330</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Warrants</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 2.5pt; padding-left: 9pt">Total</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">40,936</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">93,330</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Share Based Compensation</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company accounts for the issuance of equity awards to employees
in accordance ASC Topic 715 and 505, which requires that the cost resulting from all share based payment transactions be recognized
in the financial statements. This pronouncement establishes fair value as the measurement objective in accounting for share based
payment arrangements and requires all companies to apply a fair value based measurement method in accounting for all share based
payment transactions with employees. Period compensation costs are included in selling, general and administrative and research
and development expenses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company recognizes compensation expense related to stock
option grants on a straight-line basis over the vesting period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Options granted to consultants and other non-employees
are accounted for in accordance with ASC Topic 505-50. Accordingly, such options are recorded at fair value at the date of
grant and subsequently adjusted to fair value at the end of each reporting period until such options vest, and the fair value
of the options, as adjusted, is amortized to consulting expense over the related vesting period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Comprehensive Loss</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company&rsquo;s comprehensive loss is equal to its net
loss for the years ended December 31, 2013 and 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Segment Information</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company adheres to the provisions
of ASC Topic 280, which establishes standards for the way public business enterprises report information about operating segments
in annual financial statements and requires that those enterprises report selected information about operating segments in financial
statements issued to shareholders. Management has determined that it has only one reporting segment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Use of Estimates</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The preparation of the Company&rsquo;s financial statements
in conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the amounts reported in the Company&rsquo;s financial statements and accompanying notes. Significant
estimates and assumptions that affect amounts reported in the financial statements include impairment of goodwill and intangible
assets, deferred tax valuation allowances, allowances for doubtful accounts, revenue allocation of multi-element arrangements
and the fair value of options granted under the Company&rsquo;s share based compensation plans. Due to the inherent uncertainties
involved in making estimates, actual results reported in future periods may be different from those estimates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Recently Issued Accounting Pronouncements</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company does not expect the impact of the future adoption
of recently issued accounting pronouncements to have a material impact on the Company&rsquo;s consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On February 5, 2013, the Financial Accounting Standards Board
(FASB) issued Accounting Standards Update No. 2013-02, &ldquo;Comprehensive Income (Topic 220): Reporting of Amounts Reclassified
Out of Accumulated Other Comprehensive Income&rdquo; The standard requires that entities present information about reclassification
adjustments from accumulated other comprehensive income in their annual financial statements in a single note or on the face of
the financial statements. Public companies will also have to provide this information in their interim financial statements. The
standard requires that companies present either in a single note or parenthetically on the face of the financial statements, the
effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its source and
the income statement line items affected by the reclassification. If a component is not required to be reclassified to net income
in its entirety, companies would instead cross reference to the related footnote for additional information. The Company adopted
ASU 2013-02 on January 1, 2013, and expects no material impact on its financials as a result.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On September 13, 2013, the Internal Revenue Service issued
final Tangible Property Regulations (TPR) under Internal Revenue Code (IRC) Section 162 and IRC Section 263(a), which prescribe
the capitalization treatment of certain repair costs, asset betterments and other costs which could affect temporary deferred
taxes. Although the regulations are not effective until tax years beginning on or after January 1, 2014, certain portions may
require an accounting method change on a retroactive basis, thus requiring an IRC Section 481(a) adjustment related to fixed and
real asset deferred taxes. Pursuant to U.S. GAAP, as of the date of the issuance, the release of the regulations is treated as
a change in tax law. Therefore, we are required to determine whether there will be an impact on our financial statements as of
October 31, 2013. We are currently analyzing the expected impact of the new regulations and we do not believe the impact will
be material to our financial position or results of operations. We will continue to monitor any future changes in the TPR prospectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">3. <U>ACCOUNTS RECEIVABLE</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Accounts receivable represent amounts due from the Company&rsquo;s
customers and are presented net of allowance for doubtful accounts. These balances include revenue recognized in advance of customer
billings but do not include unbilled contractual commitments executed under license agreements. The components of accounts receivable,
net are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 97%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 74%; text-align: left">Accounts receivable - billed</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">975,996</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">774,726</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Accounts receivable - unbilled</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">65,523</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">96,634</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Less: Allowance for doubtful accounts</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,613</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Accounts receivable, net</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,041,519</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">869,747</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">4. <U>PROPERTY AND EQUIPMENT</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Property and equipment are comprised of the following as of
December 31, 2013 and 2012:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 97%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 74%; text-align: left">Computer equipment</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">743,857</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">719,053</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Furniture and fixtures</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">72,480</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">72,480</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Leasehold improvements</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">169,032</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">169,032</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Office equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">491,340</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">435,302</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1pt">Vehicles</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">147,310</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">147,310</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,624,019</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,543,177</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Less - Accumulated depreciation and amortization</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,254,924</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,093,739</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">369,095</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">449,438</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Depreciation expense for the years ended December 31, 2013
and 2012 amounted to $161,185 and $174,601, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">5. <U>GOODWILL AND INTANGIBLE ASSETS AND IMPAIRMENT</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Goodwill</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The carrying value of goodwill was $12,308,661 and $12,308,661
for the years ended December 31, 2013 and 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Identifiable intangible assets</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The changes in the carrying amount of intangible assets for
the year ended December 31, 2013 and 2012 were as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 97%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 74%; text-align: left">Balance at beginning of year</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">4,631,577</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">5,551,149</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Amortization expense</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(907,223</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(919,572</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Balance at end of year</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,724,354</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,631,577</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">The
Company has recorded the fair value of the acquired identifiable intangible assets, which are subject to amortization, using the
income approach. The following table sets forth the components of these intangible assets as of December 31, 2013 and 2012:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">As of December 31, 2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold; text-align: center">Estimated <BR>Useful</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Adjusted <BR> Carrying</TD>
    <TD NOWRAP STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Accumulated</B></FONT></TD><TD NOWRAP STYLE="font-weight: bold"></TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Net <BR>as of</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Life</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Amount</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Amortization</B></FONT></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>12/31/2013</B></FONT></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 48%; text-align: left">Trade name</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 12%; text-align: center">20 years</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">704,458</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">(260,641</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">443,817</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Patents and copyrights</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">17 years</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,117,842</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(454,421</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">663,421</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>Non-compete agreements</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">5 years</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">310,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(268,667</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">41,333</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Developed technology</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">7 years</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,941,310</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,295,135</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">646,175</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>Backlog</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">3 years</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">303,400</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(303,400</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Non-contractual customer relationships</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center">15 years</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,268,568</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,338,960</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,929,608</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">9,645,578</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(5,921,224</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,724,354</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">As of December 31, 2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Adjusted</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Net</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Carrying</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Accumulated</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">as of</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Amount</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Amortization</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">12/31/2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 61%; text-align: left">Trade name</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">704,458</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">(229,975</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">474,483</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Patents and copyrights</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,117,842</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(396,575</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">721,267</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>Non-compete agreements</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">310,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(206,667</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">103,333</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Developed technology</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,941,310</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,760,370</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,180,940</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>Backlog</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">303,400</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(303,400</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Non-contractual customer relationships</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,268,568</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,117,014</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,151,554</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">9,645,578</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(5,014,001</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,631,577</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following summarizes amortization of acquisition related
intangible assets included in the statement of operations:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; color: Red"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 92%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.5in">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Years Ended December 31,</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 74%">Cost of sales</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">771,416</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">771,416</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">General and administrative</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">135,807</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">148,156</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">907,223</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">919,572</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company expects that amortization expense for the next
five succeeding years will be as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.75in">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 87%; text-align: left">2014</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">416,657</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">2015</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">310,458</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">2016</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">310,458</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">2017</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">310,458</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">2018</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">310,458</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">These amounts are subject to change based upon the review of
recoverability and useful lives that are performed at least annually.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Goodwill and Intangible Asset Impairment</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The excess of the purchase consideration over the fair value
of the assets of acquired businesses is considered goodwill. Under authoritative guidance, purchased goodwill is not amortized,
but rather it is periodically reviewed for impairment. The Company had goodwill of $12,308,661 and $12,308,661 at December 31,
2013 and December 31, 2012. This goodwill resulted from the acquisitions of Mobilisa, Inc. and Positive Access Corporation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For the years ended December 31, 2013 and 2012, the Company
performed its annual impairment test of goodwill and concluded that no impairment charge was required for either year. Under authoritative
guidance, the Company can use industry and Company specific qualitative factors to determine whether it is more likely than not
that impairment exists, before using a two-step quantitative analysis. Events or changes in circumstances which could trigger
an impairment review include macroeconomic conditions, industry and market conditions, cost factors, overall financial performance,
other entity specific events and sustained decrease in share price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For the years ended December 31, 2013 and 2012, after a review
of these qualitative factors, the Company determined that it was necessary to perform a two-step quantitative analysis. The first
step is to compare the fair value of the Company&rsquo;s reporting unit, including goodwill to its carrying value. If the fair
value of the reporting unit exceeds its carrying amount, goodwill is considered not impaired otherwise, there is an indication
that goodwill may be impaired and the amount of loss, if any is measured by performing step two. Under step two, the impairment
loss, if any, is measured by comparing the implied fair value of the reporting unit goodwill with the carrying amount of Goodwill.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company engaged an outside consulting firm to perform this
analysis. This firm appraised the fair value of the Company&rsquo;s reporting unit is excess of its carrying value as of the reporting
date, so no second step was necessary. The firm used the income approach, on a debt-free basis, to perform its analysis, because
of the uniqueness of the Company and unrepresentative nature of the Company&rsquo;s historical performance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Based on the outside consultant&rsquo;s report and the Company&rsquo;s
review of its market capitalization and movement in stock price, Management determined that no impairment of Goodwill exists as
of December 31, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company also considered whether long-lived assets including
intangibles were also impaired. These assets are stated at cost, less accumulated amortization, which is provided for by charges
to income on a basis consistent with the utilization of the assets over their useful lives. The carrying value of intangible and
long-lived assets is reviewed periodically by the Company for the existence of facts or circumstances that may suggest impairment.
If such circumstances exist, the Company would estimate the future, undiscounted cash flows associated with the asset, and compare
that to the carrying value. If the carrying value exceeds the estimated cash flows, the asset would be written down to its estimated
fair value. As of December 31, 2013 and 2012, the Company determined that there was no impairment of intangible assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">6. <U>REVOLVING LINE OF CREDIT</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On August 17, 2011, the Company entered into a 2-year revolving
credit facility with Silicon Valley Bank. On August 15, 2013, it renewed this facility for an additional year. The maximum borrowing
under the facility is $2 million. Borrowings under the facility are subject to certain limitations based on a percentage of accounts
receivable, as defined in the agreement, and are secured by all of the Company&rsquo;s assets. The facility bears interest at
a rate of U.S. prime (3.25% at December 31, 2013) plus 1.25% - 1.75%, depending on the Company&rsquo;s cash plus availability.
Interest is payable monthly and the principal is due upon maturity on October 15, 2014. At December 31, 2013, there were no amounts
outstanding, the Company is in compliance with its covenants, and unused availability under the facility was approximately $593,575.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The facility contains a tangible net worth covenant requiring
that, as of each monthly reporting, total assets minus intangible assets minus capitalized software development costs minus total
liabilities plus subordinated debt is at least equal to $(800,000), starting October 31, 2013, and increasing immediately by 50%
for new debt or equity received and 50% of quarterly net income (with no reduction for losses).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left">7.</TD><TD STYLE="text-align: justify"><U>ACCRUED EXPENSES</U></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Accrued expenses are comprised of the following as of December
31, 2013 and 2012:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 92%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: right; padding-left: 0">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 74%; text-align: left; padding-left: 0">Professional fees</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">136,152</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">186,488</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0">Payroll and related</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">362,960</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">345,013</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 0">Navy Contract Close-out</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">117,970</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; padding-left: 0">Other</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">84,846</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">25,313</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: right; padding-bottom: 2.5pt; padding-left: 0">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">701,928</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">556,814</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left">8.</TD><TD STYLE="text-align: justify"><U>INCOME TAXES</U></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">ASC Topic 740-10 created a new recognition threshold and a
measurement approach for tax positions recognized in the financial statements. As of December 31, 2013, the Company has no material
uncertain tax positions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As a result of continuing losses for tax purposes, the Company
has historically not paid income taxes and has recorded a full valuation allowance against the net deferred tax asset. Interest
and penalties related to unrecognized tax benefits are recorded in income tax expense. There was no accrued interest related to
unrecognized tax benefits at December 31, 2013. The tax years 2010-2013 remain open to examination by the major taxing jurisdictions
to which the Company is subject.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income
tax purposes. Significant components of the Company&rsquo;s deferred tax assets for federal and state income taxes as of December
31, 2013 and 2012 are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left">Deferred tax assets:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 72%; font-size: 10pt; text-align: left; padding-left: 9pt">NOL Carryforward</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">16,473,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">16,024,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; padding-left: 9pt">Reserves</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 9pt">Deferred rent</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">66,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">74,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 9pt">Research &amp; development tax credits</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">139,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">78,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 9pt">Total deferred tax assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">16,678,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">16,177,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left">Deferred tax liabilities: Intangible assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(1,355,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(1,718,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 9pt">Intangible Assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(1,355,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(1,718,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; padding-left: 9pt">Other</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(1,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt; padding-left: 9pt">Depreciation</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(138,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(120,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 9pt">Total deferred tax liabilities</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(1,494,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(1,838,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Net deferred tax assets</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">15,184,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">14,339,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Less: Valuation allowance</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(15,184,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(14,339,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt; padding-left: 0.25in">Deferred tax assets, net of allowance</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Realization of deferred tax assets is dependent upon future
earnings, if any. The Company has recorded a full valuation allowance against its deferred tax assets since management believes
that it is more likely than not that these assets will not be realized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of December 31, 2013 the Company had net operating loss
carryforwards (NOL&rsquo;s) for federal and New York State income tax purposes of approximately $41.2 million. There can be no
assurance that the Company will realize the benefit of the NOL&rsquo;s. The federal and state NOL&rsquo;s are available to offset
future taxable income and expire from 2018 through 2030 if not utilized. Under Section 382 of the Internal Revenue Code, these
NOL&rsquo;s may be limited due to ownership changes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The effective tax rate for the years ended December 31, 2013
and 2012 is different from the tax benefit that would result from applying the statutory tax rates primarily due to the recognition
of valuation allowances.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">9. <U>STOCKHOLDERS&rsquo; EQUITY</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Series A Convertible Preferred Stock</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In January 1997, the Board of Directors authorized the creation
of a class of Series A Convertible Preferred Stock with a par value of $.01. The Series A Convertible Preferred Stock is convertible
into an equal number of common shares at the holder&rsquo;s option, subject to adjustment for anti- dilution. The holders of Series
A Convertible Preferred Stock are entitled to receive dividends as and if declared by the Board of Directors.In the event of liquidation
or dissolution of the Company, the holders of Series A Convertible Preferred Stock are entitled to receive all accrued dividends,
if applicable, plus the liquidation price of $ 1.00 per share. As of December 31, 2013 and 2012, there were no outstanding shares
of Series A Convertible Preferred Stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Stock Options and Share Based Compensation</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In order to retain and attract qualified personnel necessary
for the success of the Company, the Company adopted several Stock Option Plans from 1998 through 2004 (and an amendment to the
2004 plan in 2006 pursuant to which the plan was renamed the &ldquo;2006 Equity Incentive Plan&rdquo; and amended to provide for
the issuance of other types of equity incentives such as restricted stock grants) (collectively, the &ldquo;Plans&rdquo;) covering
up to 781,250 of the Company&rsquo;s common shares, pursuant to which officers, directors, key employees and consultants to the
Company are eligible to receive incentive stock options and nonqualified stock options. The Compensation Committee of the Board
of Directors administers these Plans and determines the terms and conditions of options granted, including the exercise price.
These Plans generally provide that all stock options will expire within ten years of the date of grant. Incentive stock options
granted under these Plans must be granted at an exercise price that is not less than the fair market value per share at the date
of the grant and the exercise price must not be less than 110% of the fair market value per share at the date of the grant for
grants to persons owning more than 10% of the voting stock of the Company. These Plans also entitle non-employee directors to
receive grants of non-qualified stock options as approved by the Board of Directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Stock option activity under the 1998, 1999, 2001, 2003 and
2006 Stock Option Plans during the periods indicated below is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.5in">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: center">Weighted-</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Number of <BR> Shares <BR> Subject to <BR> Issuance</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Weighted- <BR> average <BR> Exercise <BR> Price</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">average <BR> Remaining <BR> Contractual <BR> Term</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">&nbsp;</P><P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><B>Aggregate <BR> Intrinsic <BR> Value</B></P></TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 48%">Outstanding at December 31, 2011</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">155,533</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">15.44</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 12%; text-align: center">2.29 years</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Granted</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Forfeited or expired</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(29,483</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">24.80</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Exercised</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(32,720</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4.00</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt"></TD><TD STYLE="padding-bottom: 1pt; text-align: right"></TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1pt">Outstanding at December 31, 2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">93,330</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">16.48</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center">1.66 years</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">348,352</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Granted</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">16,875</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">03.12</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Forfeited or expired</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(50,119</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">15.12</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Exercised</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">19,150</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">3.68</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1pt">Outstanding at December 31, 2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">40,936</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">18.48</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center">2.42 years</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">12,100</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Exercisable at December 31, 2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">26,530</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">26.64</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center">1.52 years</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">There were 135,000 and no options granted in the years ended
December 31, 2013 and 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following is a summary of stock options as of December
31, 2013:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="8" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Options Outstanding</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Options Exercisable</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Weighted</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Weighted-</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold; text-align: center">Weighted-</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">average</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">average</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Number of</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold; text-align: center">average</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Exercise</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Number of</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Exercise</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; border-bottom: Black 1pt solid">Range of Exercise Prices</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Options</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Remaining Life</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Price</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Options</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Price</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 35%">$3.12 to $8.00</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">13,750</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 12%; text-align: center">1.42 years</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">1.04</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>$8.08 to $24.00</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">13,830</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">0.27 years</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">4.00</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">13,173</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">5.84</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>$24.08 to $40.00</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,125</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">0.32 years</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2.24</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,125</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">3.44</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">$40.08 to $45.12</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">10,231</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center">0.40 years</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">9.12</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">10,231</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">17.36</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">40,936</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center">2.42 years</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">17.04</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">26,529</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">26.64</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The weighted-average fair value of the options granted during
the years ended December 31, 2013 and 2012 is $3.12 and $0 respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of December 31, 2013, the Company had 318,510 options available
for future grant under the existing Stock Option and Equity Incentive Plans. As of December 31, 2013, there was $ 41,700 of total
unrecognized compensation cost, net of estimated forfeitures, related to all unvested stock options and restricted stock, which
is expected to be recognized over a weighted average period of approximately 3.17 years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Share based compensation expense for the years ended December
31, 2013 and 2012 is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Years&nbsp;Ended&nbsp;December&nbsp;31,</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Compensation cost recognized:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 74%; text-align: left">Stock options</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">19,053</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">52,677</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Restricted stock</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">0</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">0</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">19,053</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">52,677</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Years&nbsp;Ended&nbsp;December&nbsp;31,</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 74%">Selling</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">499</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">9,216</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">General and administrative</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,467</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">16,788</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Research and development</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">12,087</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">26,673</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">19,053</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">52,677</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company capitalized $0 in share-based compensation cost
in both years 2013 and 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company has a net operating loss carry-forward as of December
31, 2013, and no excess tax benefits for the tax deductions related to share based awards were recognized in the statements of
operations. Additionally, no incremental tax benefits were recognized from stock options exercised in 2013 that would have resulted
in a reclassification to reduce net cash provided by operating activities with an offsetting increase in net cash provided by
financing activities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">All stock options have been issued with an exercise price that
is equal or above the fair market value of the Company&rsquo;s Common Stock on the date of grant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Warrants</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">All previously granted warrants were issued with an exercise
price that was equal to or above the fair market value of the Company&rsquo;s common stock on the date of grant. As of December
31, 2013, the Company had no remaining warrants outstanding. No warrants were exercised in 2013 or 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">11. <U>COMMITMENTS AND CONTINGENCIES</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Operating Leases</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company has entered into various leases for office space.
The Company leases offices in New York and Washington states. Those leases expire in March, 2018 and July, 2017, respectively.
The Washington office is owned by a related party and is discussed in Note 12. Future minimum lease payments under these lease
agreements are as follows for the years ended December 31:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 40%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 27%; text-align: left">2014</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">520,623</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">2015</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">408,030</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">2016</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">408,019</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">2017</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">379,226</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">2018</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">82,327</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Total</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,798,225</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Rent expense for the years ended December 31, 2013 and 2012
amounted to $532,081 and $534,047, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Royalty and License Agreements</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company entered into an agreement
with a former officer of the Company during 1996 to license certain software. The agreement stipulated, among other provisions,
that the officer would receive royalties equal to a percentage of the Company&rsquo;s gross sales. This agreement was terminated
in May 1999 and was superseded by a new agreement which calls for payment of royalties of .005% on gross sales from $2,000,000
to $52,000,000 and .0025% on gross sales in excess of $52,000,000 pertaining to those patents on which Mr. Messina was identified
as an inventor. As of December 31, 2013, total fees paid under this agreement amounted to approximately $1,650.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Consulting Agreements</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In March 2009, the Company entered into
an agreement with an investor relations firm. The engagement period was for twelve months commencing March 16, 2009. In exchange
for its services, the Company paid the firm $13,500 per month for the first 24 months of the agreement. In addition, each month
for the first 24 months of the agreement, the Company delivered to the investor relations firm 1,302 shares of restricted stock.
The stock is restricted from sale for a period of two years from the date of grant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The agreement is automatically renewed for successive twelve
month periods unless either party gives written notice no later than 30 days prior to the expiration period. Afterwards, the fee
may be subject to change by mutual agreement of the parties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of April 11, 2011, the fee was reduced to $10,000 per month.
No additional shares were issued after February 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Legal Proceedings</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company is not aware of any infringement by our products
or technology on the proprietary rights of others.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company is not currently involved in any legal or regulatory
proceeding, or arbitration, the outcome of which is expected to have a material adverse effect on its business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Severance and Change-in-Control Agreements</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On November 16, 2010, the Company entered into an Executive
Severance Agreement with Mr. Mundy, the Company&rsquo;s former Chief Financial Officer. Under the agreement, if Mr. Mundy was
terminated without cause, if he resigned with &ldquo;good reason&rdquo; (as defined in the agreement), or if he was terminated
as a result of a change of control, he would have been entitled to 1.99 years of his then base salary, a gross amount equal to
any quarterly bonus target applicable during the quarter, accelerated vesting of all outstanding stock options and coverage of
health benefits for a period of up to 12 months. The agreement had a term of two years. On April 1, 2012, Mr. Mundy resigned from
the Company. In lieu of the above mentioned agreement, the Company entered into a consulting agreement with Mr. Mundy which had
a term of nine months at $15,250 per month. The final payment was made pursuant to this agreement on January 4, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>401(k) Plan</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company has a retirement savings 401(k) plan. The plan
permits eligible employees to make voluntary contributions to a trust, up to a maximum of 35% of compensation, subject to certain
limitations. The Company has elected to contribute a matching contribution equal to 50% of the first 6%of an eligible employee&rsquo;s
deferral election. The Company may also make discretionary contributions, subject to certain conditions, as defined in the plan.
The Company&rsquo;s matching contributions were $38,050 and $52,972 for 2013 and 2012, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">12. <U>RELATED PARTY TRANSACTIONS</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Mobilisa leases office space from a company (&ldquo;Lessor
Company&rdquo;) that is wholly-owned by two directors, who are members of management. The Company entered into a 10-year lease
for the office space ending in 2017. The base annual rent for this facility is currently $ 85,498 and is subject to annual increases
based on the increase in the CPI index plus 1%. For the year ended December 31, 2013 and 2012, total rent payments for this office
space were $92,046 and $91,780, respectively. This operating lease is referenced in Note 11.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Lessor Company's entire operations consist of the leased
property and related bank debt. The Company is a guarantor of the loans for the leased property. As of December 31, 2013, the
Company's maximum exposure to loss was $177,999.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In June 2009, the FASB issued guidance included in ASC Topic
810-10, &ldquo;Amendments to FASB Interpretation No. 46(R).&rdquo;This updated guidance requires a qualitative approach to identifying
a controlling financial interest in a variable interest entity (VIE), and requires ongoing assessment of whether an entity is
a VIE and whether an interest in a VIE makes the holder the primary beneficiary of the VIE. Under the FASB guidance, companies
are required to consolidate a related variable interest entity (&quot;VIE&quot;) when the reporting company is the &quot;primary
beneficiary&quot; of that entity and holds a variable interest in the VIE. The determination of whether a reporting company is
the primary beneficiary of a VIE ultimately turns on whether the reporting entity will absorb a majority of the VIE's anticipated
losses or receive a majority of the VIE's anticipated gains.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company analyzed its transactions with and relationship
to the Lessor Company and concluded that it had an implicit variable interest in the Lessor Company. However, the primary beneficiaries,
based on an assessment of what entity absorbs a majority of the entity's expected losses, receives a majority of its expected
residual returns, or both, as a result of holding variable interests, are the common ownersA. ccordingly, the Company is not required
to consolidate the operations of the Lessor Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">13. <U>QUARTERLY FINANCIAL DATA (UNAUDITED)</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table sets forth unaudited financial data for
each of the Company&rsquo;s last eight fiscal quarters.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 8pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="14" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year Ended December 31, 2013</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="14" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year Ended December 31, 2012</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">First</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Second</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Third</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Fourth</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">First</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Second</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Third</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Fourth</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Quarter</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Quarter</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Quarter</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Quarter</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Quarter</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Quarter</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Quarter</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Quarter</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="14" NOWRAP STYLE="text-align: center">(Dollars in thousands, except per share data)</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Income Statement Data:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 28%; padding-left: 9pt">Revenues</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 6%; text-align: right">1,633</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 6%; text-align: right">1,720</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 6%; text-align: right">2,579</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 6%; text-align: right">1,366</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 6%; text-align: right">2,711</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 6%; text-align: right">3,441</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 6%; text-align: right">2,123</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 6%; text-align: right">528</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 9pt">Gross profit</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">895</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">960</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,781</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">889</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,958</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,230</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,567</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">46</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Income (loss) from operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(921</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(919</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">16</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(601</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">15</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">61</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(381</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,956</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 9pt">Net income (loss)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(921</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(919</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">16</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(600</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">15</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">61</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(381</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(1,955</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Net income (loss) per common share:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt"><FONT STYLE="font-weight: normal; font-style: normal">Diluted</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-weight: normal; font-style: normal">&nbsp;</FONT></TD>
    <TD STYLE="font-weight: bold; text-align: left">$<FONT STYLE="font-weight: normal; font-style: normal">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 8pt; font-weight: normal; font-style: normal">(0.24</FONT></TD><TD STYLE="font-weight: bold; text-align: left">)<FONT STYLE="font-weight: normal; font-style: normal">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-weight: normal; font-style: normal">&nbsp;</FONT></TD>
    <TD STYLE="font-weight: bold; text-align: left">$<FONT STYLE="font-weight: normal; font-style: normal">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 8pt; font-weight: normal; font-style: normal">(0.24</FONT></TD><TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-weight: normal; font-style: normal">)</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-weight: normal; font-style: normal">&nbsp;</FONT></TD>
    <TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-weight: normal; font-style: normal">$</FONT></TD><TD STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-weight: normal; font-style: normal">0.00</FONT></TD><TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-weight: normal; font-style: normal">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-weight: normal; font-style: normal">&nbsp;</FONT></TD>
    <TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-weight: normal; font-style: normal">$&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 8pt; font-weight: normal; font-style: normal">(0.16</FONT></TD><TD STYLE="font-weight: bold; text-align: left">)<FONT STYLE="font-weight: normal; font-style: normal">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-weight: normal; font-style: normal">&nbsp;</FONT></TD>
    <TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-weight: normal; font-style: normal">$</FONT></TD><TD STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-weight: normal; font-style: normal">0.00</FONT></TD><TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-weight: normal; font-style: normal">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-weight: normal; font-style: normal">&nbsp;</FONT></TD>
    <TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-weight: normal; font-style: normal">$</FONT></TD><TD STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-weight: normal; font-style: normal">0.00</FONT></TD><TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-weight: normal; font-style: normal">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-weight: normal; font-style: normal">&nbsp;</FONT></TD>
    <TD STYLE="font-weight: bold; text-align: left">$<FONT STYLE="font-weight: normal; font-style: normal">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 8pt; font-weight: normal; font-style: normal">(0.08</FONT></TD><TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-weight: normal; font-style: normal">)&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-weight: normal; font-style: normal">&nbsp;</FONT></TD>
    <TD STYLE="font-weight: bold; text-align: left">$<FONT STYLE="font-weight: normal; font-style: normal">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 8pt; font-weight: normal; font-style: normal">(0.56</FONT></TD><TD STYLE="font-weight: bold; text-align: left">)<FONT STYLE="font-weight: normal; font-style: normal">&nbsp;</FONT></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Due to rounding, quarterly net income (loss) per share may
not add up to the total net loss for the year.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">14. <U>SUBSEQUENT EVENTS</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1.9pt">On January 14, 2014, the Company closed
a secondary public offering of a previously announced 972,500 shares of its common stock and an over-allotment option of 145,875
additional shares. The stock was offered to the public at $3.60 per share. The offering grossed and netted the Company approximately
$4,026,000 and $3,644,000 in cash, respectively. The difference between the two is from the underwriting discount and other offering
expenses payable by the Company. Aegis Capital Corp. acted as the sole underwriter for the offering. The Company offered the underwriter
48,625 of common stock warrants, at a price of $4.48, which will be exercisable one year after the date of the offering and will
expire on the fifth anniversary of that offering. After the offering, the Company had 4,605,558 shares of common stock outstanding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1.9pt">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>





<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0"><FONT STYLE="font-size: 18pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Shares</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0"><FONT STYLE="font-size: 18pt"><B>Common
Stock</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img src="tlogo.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;<B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PROSPECTUS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Aegis Capital Corp</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PART II</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Information Not Required in Prospectus</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Item 13. Other Expenses of Issuance
and Distribution</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table
sets forth the fees and expenses, other than underwriting discounts and commissions, payable in connection with the registration
of the common stock hereunder. All amounts are estimates except the SEC registration fee and the FINRA filing fee.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 80%; text-align: left; text-indent: -0.1in; padding-left: 0.1in"> SEC registration fee </TD><TD STYLE="width: 1%"> &nbsp; </TD>
    <TD STYLE="width: 1%; text-align: left"> $ </TD><TD STYLE="width: 17%; text-align: right"> 1,135.85 </TD><TD STYLE="width: 1%; text-align: left"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in"> FINRA filing fee </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> $ </TD><TD STYLE="text-align: right"> 1,966.25 </TD><TD STYLE="text-align: left"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in"> Printing expenses </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> $ </TD><TD STYLE="text-align: right"> 6,000.00 </TD><TD STYLE="text-align: left"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in"> Legal fees and expenses </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> $ </TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt"> 120,000.00 </FONT></TD><TD STYLE="text-align: left"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in"> Accounting fees and expenses </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> $ </TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt"> 35,000.00 </FONT></TD><TD STYLE="text-align: left"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in"> Transfer agent and registrar fees and expenses </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> $ </TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt"> 7,500.00 </FONT></TD><TD STYLE="text-align: left"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in"> Miscellaneous </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> $ </TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt"> 28,377.90 </FONT></TD><TD STYLE="text-align: left"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in"> Total </TD><TD> &nbsp; </TD>
    <TD STYLE="text-align: left"> $ </TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt"> 200,000.00 </FONT></TD><TD STYLE="text-align: left"> &nbsp; </TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Item 14. Indemnification of Directors
and Officers</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Intellicheck Mobilisa&rsquo;s certificate
of incorporation limits the liability of directors to the maximum extent permitted by Section 145 of the Delaware General Corporation
Law. Delaware law provides that the directors of a corporation will not be personally liable to such corporation or its stockholders
for monetary damages for breach of their fiduciary duties as directors, except for liability (i) for any breach of their duty of
loyalty to the corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law; (iii) for unlawful payments of dividends or unlawful stock repurchases or redemptions as provided
in Section 174 of the Delaware General Corporation Law; or (iv) for any transaction from which the director derives an improper
personal benefit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Company provides officers&rsquo; and
directors&rsquo; liability insurance for its officers and directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Item 15. Recent Sales of Unregistered
Securities</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">None.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Item 16. Exhibits and Financial Statement
Schedules</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><B><I>(a)</I></B></TD><TD><B><I>Exhibits</I></B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The exhibits to the registration statement
are listed in the Exhibit Index to this registration statement and are incorporated herein by reference.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><B><I>(b)</I></B></TD><TD><B><I>Financial Statement Schedules</I></B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">All schedules have been omitted because
the information required to be presented in them is not applicable or is shown in the consolidated financial statements or related
notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item 17. Undertakings</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Insofar as indemnification for liabilities
arising under the Securities Act of 1933, as amended, or the Act, may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore unenforceable.
In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">The Registrant hereby undertakes that:&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">(a) For purposes of determining any liability
under the Securities Act of 1933, as amended, the information omitted from a form of prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in the form of prospectus filed by the Registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act of 1933, as amended, shall be deemed to be part of this registration statement as of
the time it was declared effective; and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">(b) For the purpose of determining any
liability under the Securities Act of 1933, as amended, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><B>SIGNATURES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.2in"> Pursuant to the requirements of the
Securities Act of 1933, as amended, the registrant has duly caused this Amendment No. 2 to the registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the city of Port Townsend, state of Washington, on January 8,
2015. </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.2in">&nbsp;&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2"><FONT STYLE="font-size: 10pt">INTELLICHECK MOBILISA, INC.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%">&nbsp;</TD>
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 45%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">By: </FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">/s/<FONT STYLE="font-variant: small-caps"> William H. ROOF</FONT></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">William H. Roof</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><I>Chief Executive Officer </I></FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"> Pursuant to the requirements of the
Securities Act of 1933, as amended, this Amendment No. 2 has been signed below by the following persons on behalf of the registrant
in the capacities and on the dates indicated. </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD NOWRAP STYLE="width: 31%; text-decoration: none; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt"><B> Signature </B></FONT></TD>
    <TD NOWRAP STYLE="width: 2%; padding-bottom: 1pt"> &nbsp; </TD>
    <TD NOWRAP STYLE="width: 34%; text-decoration: none; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt"><B> Title </B></FONT></TD>
    <TD NOWRAP STYLE="width: 2%"> &nbsp; </TD>
    <TD NOWRAP STYLE="width: 31%; text-decoration: none; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt"><B> Date </B></FONT></TD></TR>
<TR>
    <TD NOWRAP STYLE="vertical-align: top"> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: top"> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: top; text-align: center"> &nbsp; </TD>
    <TD NOWRAP> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </TD></TR>
<TR>
    <TD NOWRAP STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"> /s/
    <FONT STYLE="font-variant: small-caps">William  H. Roof</FONT> </FONT></TD>
    <TD NOWRAP STYLE="vertical-align: top"> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: top; text-align: center"><FONT STYLE="font-size: 10pt"> Chief Executive Officer </FONT></TD>
    <TD NOWRAP> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: bottom; text-align: center"> January 8, 2015 </TD></TR>
<TR>
    <TD NOWRAP STYLE="vertical-align: top; text-align: center"><FONT STYLE="font-size: 10pt"> William H.  Roof </FONT></TD>
    <TD NOWRAP STYLE="vertical-align: top"> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: top; text-align: center"><FONT STYLE="font-size: 10pt"> (Principal Executive Officer) </FONT></TD>
    <TD NOWRAP> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </TD></TR>
<TR>
    <TD NOWRAP STYLE="vertical-align: top"> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: top"> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: top; text-align: center"> &nbsp; </TD>
    <TD NOWRAP> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </TD></TR>
<TR>
    <TD NOWRAP STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: center"> &#42; </TD>
    <TD NOWRAP STYLE="vertical-align: top"> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: top; text-align: center"><FONT STYLE="font-size: 10pt"> Chief Financial Officer (Principal </FONT></TD>
    <TD NOWRAP> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: bottom; text-align: center"> January 8, 2015 </TD></TR>
<TR>
    <TD NOWRAP STYLE="vertical-align: top; text-align: center"><FONT STYLE="font-size: 10pt"> Bill White </FONT></TD>
    <TD NOWRAP STYLE="vertical-align: top"> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: top; text-align: center"><FONT STYLE="font-size: 10pt"> Financial and Accounting Officer) </FONT></TD>
    <TD NOWRAP> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </TD></TR>
<TR>
    <TD NOWRAP STYLE="vertical-align: top"> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: top"> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: top; text-align: center"> &nbsp; </TD>
    <TD NOWRAP> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </TD></TR>
<TR>
    <TD NOWRAP STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: center"> &#42; </TD>
    <TD NOWRAP STYLE="vertical-align: top"> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: top; text-align: center"><FONT STYLE="font-size: 10pt"> Chairman of the Board and Director </FONT></TD>
    <TD NOWRAP> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: bottom; text-align: center"> January 8, 2015 </TD></TR>
<TR>
    <TD NOWRAP STYLE="vertical-align: top; text-align: center"><FONT STYLE="font-size: 10pt"> Michael D. Malone </FONT></TD>
    <TD NOWRAP STYLE="vertical-align: top"> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: top; text-align: center"> &nbsp; </TD>
    <TD NOWRAP> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </TD></TR>
<TR>
    <TD NOWRAP STYLE="vertical-align: top"> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: top"> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: top; text-align: center"> &nbsp; </TD>
    <TD NOWRAP> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </TD></TR>
<TR>
    <TD NOWRAP STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: center"> &#42; </TD>
    <TD NOWRAP STYLE="vertical-align: top"> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: top; text-align: center"><FONT STYLE="font-size: 10pt"> Director </FONT></TD>
    <TD NOWRAP> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: bottom; text-align: center"> January 8, 2015 </TD></TR>
<TR>
    <TD NOWRAP STYLE="vertical-align: top; text-align: center"><FONT STYLE="font-size: 10pt"> Emil R. Bedard </FONT></TD>
    <TD NOWRAP STYLE="vertical-align: top"> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: top; text-align: center"> &nbsp; </TD>
    <TD NOWRAP> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </TD></TR>
<TR>
    <TD NOWRAP STYLE="vertical-align: top"> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: top"> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: top; text-align: center"> &nbsp; </TD>
    <TD NOWRAP> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: top">
    <TD NOWRAP STYLE="border-bottom: Black 1pt solid; padding-left: 4.65pt; text-align: center"> &#42; </TD>
    <TD NOWRAP> &nbsp; </TD>
    <TD NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 10pt"> Director </FONT></TD>
    <TD NOWRAP> &nbsp; </TD>
    <TD NOWRAP STYLE="text-align: center"> January 8, 2015 </TD></TR>
<TR STYLE="vertical-align: top">
    <TD NOWRAP STYLE="padding-left: 4.65pt; text-align: center"><FONT STYLE="font-size: 10pt"> Jack A. Davis </FONT></TD>
    <TD NOWRAP> &nbsp; </TD>
    <TD NOWRAP STYLE="text-align: center"> &nbsp; </TD>
    <TD NOWRAP> &nbsp; </TD>
    <TD NOWRAP> &nbsp; </TD></TR>
<TR>
    <TD NOWRAP STYLE="vertical-align: top"> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: top"> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: top; text-align: center"> &nbsp; </TD>
    <TD NOWRAP> &nbsp; </TD>
    <TD NOWRAP STYLE="vertical-align: bottom"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: top">
    <TD NOWRAP STYLE="border-bottom: Black 1pt solid; padding-left: 4.65pt; text-align: center"> &#42; </TD>
    <TD NOWRAP> &nbsp; </TD>
    <TD NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 10pt"> Director </FONT></TD>
    <TD NOWRAP> &nbsp; </TD>
    <TD NOWRAP STYLE="text-align: center"> January 8, 2015 </TD></TR>
<TR STYLE="vertical-align: top">
    <TD NOWRAP STYLE="padding-left: 4.65pt; text-align: center"><FONT STYLE="font-size: 10pt"> William P. Georges </FONT></TD>
    <TD NOWRAP> &nbsp; </TD>
    <TD NOWRAP STYLE="text-align: center"> &nbsp; </TD>
    <TD NOWRAP> &nbsp; </TD>
    <TD NOWRAP> &nbsp; </TD></TR>
<TR STYLE="vertical-align: top">
    <TD NOWRAP STYLE="padding-left: 4.65pt; text-align: center"> &nbsp; </TD>
    <TD NOWRAP> &nbsp; </TD>
    <TD NOWRAP STYLE="text-align: center"> &nbsp; </TD>
    <TD NOWRAP> &nbsp; </TD>
    <TD NOWRAP> &nbsp; </TD></TR>
<TR STYLE="vertical-align: top">
    <TD NOWRAP STYLE="border-bottom: Black 1pt solid; padding-left: 4.65pt; text-align: center"> &#42; </TD>
    <TD NOWRAP> &nbsp; </TD>
    <TD NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 10pt"> Director </FONT></TD>
    <TD NOWRAP> &nbsp; </TD>
    <TD NOWRAP STYLE="text-align: center"> January 8, 2015 </TD></TR>
<TR STYLE="vertical-align: top">
    <TD NOWRAP STYLE="padding-left: 4.65pt; text-align: center"><FONT STYLE="font-size: 10pt"> Guy L. Smith </FONT></TD>
    <TD NOWRAP> &nbsp; </TD>
    <TD NOWRAP STYLE="text-align: center"> &nbsp; </TD>
    <TD NOWRAP> &nbsp; </TD>
    <TD NOWRAP> &nbsp; </TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 2%; font-size: 10pt"> &#42;By:&nbsp;&nbsp; </TD>
    <TD STYLE="width: 29%; font-size: 10pt; border-bottom: Black 1pt solid"> /s/ William H. Roof </TD>
    <TD STYLE="width: 69%"> &nbsp; </TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-size: 10pt"> &nbsp; </TD>
    <TD STYLE="font-size: 10pt"> Attorney-in-fact </TD>
    <TD> &nbsp; </TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INDEX TO EXHIBITS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10%; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">Exhibit No.</FONT></TD>
    <TD STYLE="width: 2%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 88%; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">Description</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt"> 1.1&#42; </FONT></TD>
    <TD> &nbsp; </TD>
    <TD><FONT STYLE="font-size: 10pt"> Form of Underwriting Agreement </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">3.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">Certificate of Incorporation of the Company (1)</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">3.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">Amendment to the Certificate of Incorporation of the Company (11)</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">3.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">Amended and Restated By-laws of the Company (14) </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">3.4</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">Certificate of Designation of Preferred Stock of Intelli-Check, Inc. (5)</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">4.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">Specimen Stock Certificate (7)</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">5.1*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Opinion of K&amp;L Gates LLP</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">10.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">Agreement of Lease between the Company and JQ1 Associates, LLC, dated as of April 19, 2010
    (4)</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">10.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">Agreement of Lease between Mobilisa and Eagle Coast, LLC, dated as of August 1, 2007. (7)</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">10.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">Agreement of Lease between the Company and King I, LLC, dated as of February 1, 2010. (7)</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">10.4</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">1998 Stock Option Plan (1) </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">10.5</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">1999 Stock Option Plan (1) </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">10.6</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">2001 Stock Option Plan (2) </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">10.7</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">2003 Stock Option Plan (3) </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">10.8</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">2006 Equity Incentive Plan&nbsp;(15)</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">10.9</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">Memorandum of Understanding between AAMVAnet, Inc. and Intelli-Check, Inc. effective January
    29, 2002 (4)</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">10.10</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">Merger Agreement dated November 20, 2007 by and among Intelli-Check Inc., Intelli-Check
    Merger Sub, Inc., Mobilisa, Inc., and the Principal Shareholders of Mobilisa, Inc. (9)</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">10.11</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">Agreement and Plan of Merger dated August 31, 2009 by and among Intelli-Check &ndash; Mobilisa
    Inc., PA Acquisition Corporation, Positive Access Corporation, and the Principal Shareholders of Positive Access Corporation
    (10)</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">10.12</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">Executive Severance Agreement dated November 16, 2010 by and between Peter J. Mundy and
    Intellicheck Mobilisa, Inc. (12) *</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">10.13</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">Loan and Security Agreement dated August 17, 2011 by and between the Company and Silicon
    Valley Bank (13)</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.14</TD>
    <TD>&nbsp;</TD>
    <TD>Default Waiver and Fourth Amendment to Loan and Security Agreement, dated as of October 15, 2014, by and between the Company
    and Silicon Valley Bank (16)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.15</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">Executive Employment Agreement by and between the Company and Bill Roof (17)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.16</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">Severance Agreement by and between the Company and Billy J. White (17)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">14.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">Code of Business Conduct and Ethics (6)</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">21</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">List of Subsidiaries (7)</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt"> 23.1 </FONT> </TD>
    <TD> &nbsp; </TD>
    <TD><FONT STYLE="font-size: 10pt"> Consent of EisnerAmper, LLP </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">23.2*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">Consent of K&amp;L Gates LLP (contained in Exhibit 5.1)</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt"> 24.1&#42; </FONT></TD>
    <TD> &nbsp; </TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"> Power of Attorney (included on signature page hereto). </FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#42;Previously filed </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>Incorporated by reference to Registration Statement on Form SB-2 (File No. 333-87797) filed September 24, 1999.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(2)</TD><TD>Incorporated by reference to Registrant&rsquo;s Proxy Statement on Schedule 14A filed May 31, 2001.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(3)</TD><TD>Incorporated by reference to Registrant&rsquo;s Proxy Statement on Schedule 14A filed June 13, 2003.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(4)</TD><TD>Incorporated by reference to Registrant&rsquo;s Quarterly Report on Form 10-Q filed August 10, 2010.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(5)</TD><TD>Incorporated by reference to Registrant&rsquo;s Annual Report on Form 10-K filed March 31, 2003.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(6)</TD><TD>Incorporated by reference to Registrant&rsquo;s Annual Report on Form 10-K filed March 30, 2004.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(7)</TD><TD>Incorporated by reference to Registrant&rsquo;s Annual Report on Form 10-K filed March 11, 2010.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(8)</TD><TD>Incorporated by reference to Registrant&rsquo;s&nbsp;Current Report on Form 8-K filed June 15, 2007.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(9)</TD><TD>Incorporated by reference to Registrant&rsquo;s Current Report on Form 8-K filed November 21, 2007.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(10)</TD><TD>Incorporated by reference to Registrant&rsquo;s Current Report on Form 8-K filed September 1, 2009.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(11)</TD><TD>Incorporated by reference to Registrant&rsquo;s Current Report on Form 8-K filed August 13, 2014.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(12)</TD><TD>Incorporated by reference to Registrant&rsquo;s&nbsp;Annual Report on Form 10-K filed March 8, 2011.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(13)</TD><TD>Incorporated by reference to Registrant&rsquo;s&nbsp;Current Report on Form 8-K filed&nbsp;August 22, 2011.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(14)</TD><TD>Incorporated by reference to Registrant&rsquo;s Current Report on Form 8-K filed August 14, 2007.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(15)</TD><TD>Incorporated by reference to Registrant&rsquo;s Annual Report on Form 10-K filed March 27, 2013.</TD></TR>                                                                                                                                                                                <TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>(16)</TD><TD>Incorporated by reference to Registrant&rsquo;s Current Report on Form 8-K filed October 20, 2014.</TD></TR>
</TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">
<TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in">&nbsp;</TD><TD STYLE="width: 0.25in">(17)</TD><TD>Incorporated by reference to Registrant&rsquo;s Quarterly Report on Form 10-Q filed November 4,
                                                                        2014.</TD></TR>
</TABLE>

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<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>2
<FILENAME>v398344_ex23-1.htm
<DESCRIPTION>EXHIBIT 23.1
<TEXT>
<HTML>
<HEAD>
     <TITLE></TITLE>
</HEAD>
<BODY STYLE="font: 10pt Times New Roman, Times, Serif">

<P STYLE="margin: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">Exhibit 23.1</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">CONSENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We consent to the inclusion in this Amendment No. 2 to the Registration
Statement of Intellicheck Mobilisa, Inc. on Form S-1 (333-201168) to be filed on or about January 8, 2015 (the &ldquo;Amendment&rdquo;)
of our report dated December 19, 2014, on our audit of the consolidated financial statements as of December 31, 2013 and 2012 and
for each of the years in the two-year period ended December 31, 2013. We also consent to the reference of our firm under the caption
&ldquo;Experts&rdquo; in the Amendment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">/s/Eisner Amper LLP</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Iselin, New Jersey&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">January 8, 2015</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>



<P STYLE="margin: 0"></P>

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end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
