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<SEC-DOCUMENT>0001144204-10-039994.txt : 20101022
<SEC-HEADER>0001144204-10-039994.hdr.sgml : 20101022
<ACCEPTANCE-DATETIME>20100729125033
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0001144204-10-039994
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		3
FILED AS OF DATE:		20100729

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			ACORN ENERGY, INC.
		CENTRAL INDEX KEY:			0000880984
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-ENGINEERING SERVICES [8711]
		IRS NUMBER:				222786081
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		4 WEST ROCKLAND ROAD
		CITY:			MONTCHANIN
		STATE:			DE
		ZIP:			19710
		BUSINESS PHONE:		3026561708

	MAIL ADDRESS:	
		STREET 1:		4 WEST ROCKLAND ROAD
		CITY:			MONTCHANIN
		STATE:			DE
		ZIP:			19710

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	ACORN FACTOR, INC.
		DATE OF NAME CHANGE:	20060920

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	DATA SYSTEMS & SOFTWARE INC
		DATE OF NAME CHANGE:	19931019

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	DEFENSE SOFTWARE & SYSTEMS INC
		DATE OF NAME CHANGE:	19930328
</SEC-HEADER>
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.htm
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<html>
  <head>
    <title>Unassociated Document</title>
    <!--Licensed to: Vintage Filings-->
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    </head>
    <body bgcolor="#ffffff" style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><img src="v191816_logo.jpg" alt=""></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">July 28,
2010</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Mr. John
Hartz</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Senior
Assistant, Chief Accountant</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Division
of Corporation Finance</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">United
States Securities and Exchange Commission</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">100 F.
Street, N.E., Stop 4631</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Washington,
D.C. 20549</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">
            <tr>
              <td valign="top" width="6%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Re:</font></div>
              </td>
              <td valign="top" width="94%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Acorn
      Energy, Inc.</font></div>
              </td>
            </tr>
            <tr>
              <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td valign="top" width="94%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Form
      10-K for the Year Ended December 31, 2009</font></div>
              </td>
            </tr>
            <tr>
              <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td valign="top" width="94%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Form
      10-Q for the Period Ended March 31, 2010</font></div>
              </td>
            </tr>
            <tr>
              <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td valign="top" width="94%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">File
      No. 1-33886</font></div>
              </td>
            </tr>
        </table>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Dear Mr.
Hartz:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB1" style="MARGIN-LEFT: 44.5pt"></font>This letter is submitted on behalf of
Acorn Energy, Inc. (&#8220;we&#8221;, &#8220;Acorn&#8221; or the &#8220;Company&#8221;), in response to the comments
of the Staff of the Division of Corporation Finance of the Securities and
Exchange Commission in your letter of July 2, 2010 regarding the above captioned
filings.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB1" style="MARGIN-LEFT: 44.5pt"></font>Our numbered responses correlate to
the numbers in your July 2, 2010 letter and we have set forth in italics the
full text of the comments included in your letter for convenience
purposes.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB1" style="MARGIN-LEFT: 44.5pt"></font>We respond to the Staff&#8217;s comments as
follows:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Form 10-K for the Year ended
December 31, 2009</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Item 1.
Business</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Customers, page
4</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><br></div>
    <div style="TEXT-ALIGN: justify">
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="TEXT-ALIGN: justify">
          <tr valign="top" style="TEXT-ALIGN: justify;">
            <td align="right" style="WIDTH: 36pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">1.&#160;&#160;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">We
      note arrangements with customers that you appear to be substantially
      dependent upon, but for which you have not filed any contracts with these
      customers as material exhibits. For example, we note that 60% of DSIT&#8217;s
      revenues were concentrated in two customers and that you have a
      significant relationship with Allegheny Energy. Please advise if you
      considered filing your agreements with these customers as material
      exhibits under Item 601(b)(10)(ii)(B) of Regulation
  S-K.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font>We reviewed our relationships and
contractual arrangements with the two customers of DSIT and CoaLogix&#8217; contract
with Allegheny Energy prior to filing the referenced reports, and determined
that none of the agreements with these customers is &#8220;a contract upon which the
registrant&#8217;s business is substantially dependent&#8221; as described in Item
601(b)(10)(ii)(B) of Regulation S-K.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font>The Company&#8217;s business is not
substantially dependent upon its relationships with either of DSIT&#8217;s two such
customers or its relationship with Allegheny Energy.&#160;&#160;Revenues from
DSIT&#8217;s two such customers represented approximately 9.6% and 8.4%, respectively,
of the Company&#8217;s total revenues for the year ended December 31,
2009.&#160;&#160;CoaLogix&#8217; revenues from Allegheny Energy represented
approximately 14% of the Company&#8217;s total revenues for the year ended December
31, 2009.&#160;&#160;Neither DSIT&#8217;s two such customers nor Allegheny Energy is
expected to provide more than 10% of the Company&#8217;s total revenues for the year
ending December 31, 2010.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #a6a6a6">11707 Steele Creek Road, Charlotte, NC
28273</font>&#160;&#160;&#160;<font style="DISPLAY: inline; COLOR: #8db3e2">www.acornenergy.com</font>&#160;&#160;&#160;<font style="DISPLAY: inline; COLOR: #a6a6a6">Tel: (704)
827-8933&#160;&#160;&#160;Fax: (704) 827-8935</font></font></div>
    </div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Page
2</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">July 28,
2010</font></div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br>&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font>Item 601(b)(10)(ii)(B) of Regulation
S-K requires the filing of contracts &#8220;upon which the registrant&#8217;s business is
substantially dependent, as in the case of <font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-STYLE: italic">continuing</font>
contracts to sell the <font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-STYLE: italic">major</font> part
of the registrants&#8217; products of services&#8230;&#8221; (emphasis added).&#160;&#160;As
detailed above, the Company does not believe that its business is substantially
dependent upon its relationship with any of these three
customers.&#160;&#160;Further, the contracts with these customers are not
&#8220;continuing contracts&#8221; for the purchase of our products or services; the
agreements do not represent binding obligations that the customer purchase
products or services; and in each instance there is no ongoing obligation to
purchase and purchase commitments are made under separate purchase orders. We
note that due to CoaLogix&#8217; continued revenue growth, the significance of its
relationship with Allegheny Energy has and will continue to
decrease.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Legal Proceedings, page
34</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 26px">
              <div><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">&#160;
      </font></div>
            </td>
            <td style="WIDTH: 31px">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">2.</font></div>
            </td>
            <td width="871">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">For
      each legal proceeding, please tell us and revise future filings, to
      disclose:</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 58px">
              <div><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">&#160;
      </font></div>
            </td>
            <td style="WIDTH: 31px">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">&#8226;</font></div>
            </td>
            <td width="839">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">The
      amount of damages sought if
specified,</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 58px">
              <div><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">&#160;
      </font></div>
            </td>
            <td style="WIDTH: 31px">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">&#8226;</font></div>
            </td>
            <td width="839">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">The
      amount of any accrual, if necessary for an understanding of the
      contingency,</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 58px">
              <div><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">&#160;
      </font></div>
            </td>
            <td style="WIDTH: 31px">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">&#8226;</font></div>
            </td>
            <td width="839">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">The
      range of reasonably possible loss or additional loss
  or</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 58px">
              <div><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">&#160;
      </font></div>
            </td>
            <td style="WIDTH: 31px">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">&#8226;</font></div>
            </td>
            <td width="839">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">State
      that such a loss cannot be
estimated.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 45pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">If
you believe that any losses are remote, please explain in your
response.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 45pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">For
example, we note that CoaLogix is being sued by Environmental Energy Services.
However, on page 35, you indicate that you believe that Environmental Energy
Services&#8217; allegations are without merit. It is unclear, from this disclosure.
whether it is reasonably possible that losses may result, regardless of your
views as to the merit of the allegations.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font>With respect to the lawsuit filed by
Environmental Energy Services, Inc. (&#8220;EES&#8221;), as reported in the Company&#8217;s
Quarterly Report on Form 10-Q for the period ended March 31, 2010, such lawsuit
was settled effective May 11, 2010 with the terms of such settlement being
confidential.&#160;&#160;In order to be responsive to your question, we
confidentially inform you that the Company has determined that the settlement
amount paid to EES by CoaLogix was not material.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font>With respect to the lawsuit brought by
SCR-Tech, LLC against Evonik Energy Services LLC, et al. (&#8220;Evonik&#8221;) no amount of
damages was specified in the complaint, and since SCR-Tech, LLC is the
plaintiff, loss to the Company would only arise in the event Evonik is
successful in proving damages under its asserted counterclaims, and the Company
with assistance from its outside legal counsel has made the determination that
Evonik&#8217;s counterclaims are without merit and likely not to
succeed.&#160;&#160;Therefore, the Company believes that no contingency need be
accrued for any loss associated with Evonik&#8217;s counterclaims, and in any event
the amount any such loss cannot be estimated.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font>We will address the elements set out by
the Staff in our disclosure of material litigation in future
filings.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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        </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
        </div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Page
3</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">July 28,
2010</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><br>&#160;</div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Management&#8217;s Discussion and
Analysis of Financial Condition and Results of Operations</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Overview and Trend
Information, page 41</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 19.799pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">&#160;
      </font></div>
            </td>
            <td style="WIDTH: 27pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">3.</font></div>
            </td>
            <td>
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">We
      note the disclosure relating to the work of an outside firm that assisted
      with determining the economic viability of MetalliFix We also note that
      you have an outstanding effective registration statement (File No,
      333-161315) for which the filing of the Form 10-K will serve as a Section
      10(a)(3) update: Please tell us what consideration you have given to
      naming the third party and obtaining the third party s consent. Refer to
      Interpretation 233.02 of the Division&#8217;s Securities Act Rules Compliance
      and Disclosure Interpretations.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font>The Company made a determination in
December 2009 that MetalliFix was not economically viable.&#160;&#160;In making
its determination, the Company relied in part on information from tests
conducted for the Company by a third party. Since the determination that
MetalliFix was not economically viable was made by the Company and not by the
third party, we do not believe that disclosure of the third party is required
under Rule 436 or Interpretation 233.02 of the Division&#8217;s Securities Act Rules
Compliance and Disclosure Interpretations.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Critical
Accounting Policies</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Goodwill and Intangibles,
page 46</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 19.799pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">&#160;
      </font></div>
            </td>
            <td style="WIDTH: 27pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">4.</font></div>
            </td>
            <td>
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">In
      the interest of providing readers with a better insight into management&#8217;s
      judgments in accounting for long-lived assets, including goodwill and
      intangibles, please consider disclosing the following in future
      filings;</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">
          <tr valign="top">
            <td align="right" style="WIDTH: 63pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">&#8226;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Sufficient
      information to enable a reader to understand what method you apply in
      estimating the fair value of your long-lived assets, including but not
      limited to your use of a combination of discounted cash flow
      methodology;</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">
          <tr valign="top">
            <td align="right" style="WIDTH: 63pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">&#8226;&#160;&#160;</font></div>
            </td>
            <td>&#160;</td>
          </tr>
      </table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">
          <tr valign="top">
            <td align="right" style="WIDTH: 63pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">&#8226;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">How
      you group long-lived assets for impairment and your basis for that
      determination and your basis for that determination;
  and</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">
          <tr valign="top">
            <td align="right" style="WIDTH: 63pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">&#8226;&#160;&#160;</font></div>
            </td>
            <td>&#160;</td>
          </tr>
      </table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">
          <tr valign="top">
            <td align="right" style="WIDTH: 63pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">&#8226;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Explain
      how the assumptions and methodologies in the current year have changed
      since the prior year highlighting the impact of any
    changes.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 45pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">As
a related matter, if any of your reporting units have estimated fair values that
are not substantially in excess of the carrying value and to the extent that
goodwill for these reporting units, in the aggregate or individually, could
materially impact your operating results, please provide the following
disclosures for each of these reporting units;</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">
          <tr valign="top">
            <td align="right" style="WIDTH: 63pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">&#8226;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Identify
      the reporting unit;</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">
          <tr valign="top">
            <td align="right" style="WIDTH: 63pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">&#8226;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">The
      percentage by which fair value exceeds the carrying value as of the
      most-recent step-one test;</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">
          <tr valign="top">
            <td align="right" style="WIDTH: 63pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">&#8226;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">The
      amount of goodwill;</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">
          <tr valign="top">
            <td align="right" style="WIDTH: 63pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">&#8226;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">A
      description of the assumptions that drive the estimated fair
      value</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">
          <tr valign="top">
            <td align="right" style="WIDTH: 63pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">&#8226;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">A
      discussion of the uncertainty associated with the key assumptions. For
      example, assuming you use a discounted cash flow model, to the extent that
      you have included assumptions in your discounted cash flow model that
      materially deviates from your historical results, please include a
      discussion of these assumptions;
and</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">
          <tr valign="top">
            <td align="right" style="WIDTH: 63pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">&#8226;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">A
      discussion of any potential events and/or circumstances that could have a
      negative effect on the estimated fair
value.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
        </div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Page
4</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">July 28,
2010</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><br>&#160;</div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 45pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">If
you have determined that the estimated fair value substantially exceeds the
carrying value for all of your reporting units, please disclose this
determination. Please refer to Item 303 of Regulation S-K and Sections 216 and
501.14 of the Financial Reporting Codification for guidance.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 45pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We will
consider the disclosures suggested by the Staff in our future
filings.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Financial
Statement</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Balance Sheet, page
F-2</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 19.799pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">&#160;
      </font></div>
            </td>
            <td style="WIDTH: 27pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">5.</font></div>
            </td>
            <td>
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Please
      separately disclose notes receivable pursuant to Rule 5.02.3 of Regulation
      S-X</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 45pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We have
no notes receivable in trade accounts receivable pursuant to Rule 5.02.3 of
Regulation S-X.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Income Statement, page
F-3</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 19.799pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">&#160;
      </font></div>
            </td>
            <td style="WIDTH: 27pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">6.</font></div>
            </td>
            <td>
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">We
      note that your share in the losses of Paketeria was $1.6 million for the
      period ended December 31, 2008. Please provide us your calculations for
      the asset, investment and income test of significance pursuant to Rule
      3-09 of Regulation S-X&#173;.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 45pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In the
year ending December 31, 2008, we filed as a smaller reporting company. In
accordance with Rule 8 to Regulation S-X, smaller reporting companies are not
required to comply with the requirements of Rules 3-09 (or 4-08(g) or
10-01(b)(1)) of Regulation S-X. &#160;</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 45pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
addition, we point out that in 2008, the Company effectively wrote-off its
entire investment in Paketeria (and made full provisions for loans provided) as
Paketeria was insolvent and soon thereafter in 2009 entered bankruptcy.
Accordingly, if Paketeria was deemed significant under one of the tests, the
information required under Rule 8 to Regulation S-X would not be material or
relevant to the Company&#8217;s financial statements.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><a name="w_3" />&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 19.799pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">&#160;
      </font></div>
            </td>
            <td style="WIDTH: 27pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">7.</font></div>
            </td>
            <td>
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">In
      future filings please present summarized information of subsidiaries not
      consolidated and 50 percent or less owned persons pursuant to Rule 4-08(g)
      of Regulation S-X. If applicable, provide any subsidiaries not
      consolidated and 50 percent or less owned persons required by Rule 3-09 of
      regulation S-X.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 45pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We will
present the information requested by the Staff as applicable in future
filings.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
        </div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Page
5</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">July 28,
2010</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><br>&#160;</div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Exhibits 31.1 and
31.2</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 27pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">8.</font></div>
            </td>
            <td>
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">We
      note that the identification of the certifying individual at the beginning
      of the certification required by Exchange Act Rule 13a-14(a) also includes
      the title of the certifying individual. In future filings, the
      identification of the certifying individual at the beginning of the
      certification should be revised so as not to include the individual&#8217;s
      title.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 45pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We will
present identification of the certifying individual without title in future
filings.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 27pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">9.</font></div>
            </td>
            <td>
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">You
      have replaced the word &#8220;report&#8221; with &#8220;quarterly report&#8217; in paragraphs 3
      and 4 of your certifications. In future filings, please revise your
      certifications to use the word &#8220;report&#8221; instead of the description of the
      incorrect corresponding report. Your certifications should be in the exact
      form as required in Item 601(b)(31) of Regulation
  S-K.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 45pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We will
use the certification exactly in the form required by Item 601(b)(31) of
Regulation S-K in future filings.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 19.8pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">&#160;
      </font></div>
            </td>
            <td>
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Form 10-Q for the
      Period Ended March 31, 2010</font></font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 19.8pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">&#160;
      </font></div>
            </td>
            <td>
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Note 4: US Sensor
      Systems Inc. (USSI), page 7</font></font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">10.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We
note your analysis concerning the consolidation of USSI as a VIE. Please provide
for us an expanded analysis of the circumstances involving your determination of
USSI as a variable interest entity and the determination that you are the
primary beneficiary. Please address each of the factors you considered and
support your conclusions for each factor through reference to existing
GAAP.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font>Please see the attached memo analyzing
our investment in USSI and our conclusion that USSI was a VIE which required
consolidation. In addition, we call attention to the fact that in May 2010 we
exercised another option in USSI and increased our shareholdings to
approximately 15.8% (13.7% on a fully diluted basis). This was followed by a
partial exercise in June 2010 which further increased our shareholdings to 16.6%
(14.4% on a fully diluted basis). We fully expect to exercise our options in
August 2010 which would increase our shareholdings to 57.6% (50.5% on a fully
diluted basis).</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">
      <div>
        <table border="0" cellpadding="0" cellspacing="0" width="100%">
            <tr>
              <td valign="top" width="50%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
              <td colspan="2" valign="top" width="38%">

                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: normal; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Very
      truly yours,</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: normal; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ACORN
      ENERGY, INC.</font></div>
              </td>
              <td valign="top" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            </tr>
            <tr>
              <td valign="top" width="50%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
              <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
              <td valign="top" width="35%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
              <td valign="top" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            </tr>
            <tr>
              <td align="left" valign="top" width="50%" style="BORDER-BOTTOM: #ffffff solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              </td>
              <td valign="top" width="3%" style="BORDER-BOTTOM: #ffffff solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">By:
      </font></div>
              </td>
              <td align="left" nowrap valign="top" width="35%" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">/s/&#160;Joe
      B. Cogdell, Jr.</font></td>
              <td valign="top" width="12%" style="BORDER-BOTTOM: #ffffff solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            </tr>
            <tr>
              <td valign="top" width="50%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
              <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
              <td align="left" nowrap valign="bottom" width="35%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Joe
      B. Cogdell, Jr.</font></td>
              <td valign="top" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            </tr>
            <tr>
              <td valign="top" width="50%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
              <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
              <td valign="top" width="35%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Vice
      President, General Counsel &amp; Secretary</font></td>
              <td valign="top" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            </tr>
            <tr>
              <td valign="top" width="50%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
              <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
              <td valign="top" width="35%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
              <td valign="top" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            </tr>
        </table>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">From
the desk of Michael Barth</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Direct
phone number (03) 531-9328</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Direct
E-mail: barthm@dsit.co.il</font></div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">
            <tr>
              <td align="left" valign="top" width="62%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><img src="v191816_logo.jpg" alt=""></font></div>
              </td>
              <td align="right" valign="top" width="18%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><img src="v191816_logo2.jpg" alt=""></font></div>
              </td>
            </tr>
        </table>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Re: USSI
and FIN 46</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">Background</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
November 25, 2009, Acorn signed a term sheet with USSI, whereby subject to
definitive agreements, it agreed to acquire approximately a 4% interest in USSI
for $200. USSI is a Delaware corporation based in Northridge, California. USSI's
primary focus is to develop and produce fiber optic sensing systems for the
energy and defense markets.&#160;</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Following
the purchase of an additional 95,469 shares of USSI on February 23, 2010 for
$300, the Company entered into an option agreement with USSI and a related
option agreement with certain stockholders of USSI.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Company currently owns 146,386 shares of USSI&#8217;s common stock which the Company
purchased for $500 and which represents approximately 10.0% of USSI&#8217;s fully
diluted capitalization.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Under the
terms of the option agreement with USSI, the Company has the right to acquire up
to an additional 159,115 shares of USSI&#8217;s common stock for a purchase price of
$500.&#160;&#160;The Company has the right to acquire 63,646 of these shares
under the option in consideration for payment of $200 on or before May 31,
2010.&#160;&#160;If the Company exercises this installment, it has the right to
acquire the remaining 95,469 shares under the option on or before August 27,
2010 in consideration for payment of $300.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Under the
Company&#8217;s agreement with certain of USSI&#8217;s stockholders, the Company has the
right to acquire 516,378 shares of USSI common stock held by such stockholders
in consideration for payment to them of $2,112 on or before August 27,
2010.&#160;&#160;If the Company exercises the options described in this and in
the preceding paragraph, the Company would own common stock of USSI representing
approximately 51% of USSI&#8217;s fully diluted capitalization.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Under the
agreement with USSI, if the Company exercises the options to acquire USSI&#8217;s
common stock described in the two preceding paragraphs, the Company would have
the right to acquire 1,693,391 additional shares of USSI&#8217;s common stock from
USSI on or before November 30, 2010 in consideration for payment of
$1,500.&#160;&#160;If the Company exercises this option, it would have the right
to acquire 1,693,391 additional shares of common stock from USSI on or before
May 30, 2011 in consideration for payment of $1,500.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If the
Company purchases all of the USSI common stock it is entitled to purchase under
the agreements, the Company would hold USSI shares representing approximately
84% of USSI&#8217;s fully diluted capitalization.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
        </div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: center">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><img src="v191816_logo.jpg" alt=""></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br>&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">From PWC&#8217;s Guide to Accounting for
VIE&#8217;s</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Appendix
B: Detailed Steps to Navigate through FAS 167</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">STEP 1: Determine if FAS 167
applies to the reporting entity.</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Step
1A: Is the counterparty an &#8220;entity&#8221;? (VE 2.1)</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Yes &#8211; Proceed to step
1B</font>.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">No &#8211;
Apply other appropriate GAAP.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The VIE
model applies to legal entities that are used to conduct activities or to hold
assets.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
definition of legal entity includes all legal structures established to manage
or administer activities of any kind or to hold assets or liabilities. For
example, the following types of entities would all qualify as entities under the
VIE model:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8226;
Corporations</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8226;
Partnerships</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8226; Other
unincorporated entities</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8226; Limited
liability companies</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8226; Grantor
trusts</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8226; Other
trusts</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #ff0000">USSI is considered an entity under FAS
167</font><font style="DISPLAY: inline; COLOR: #ff0000">.</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Step 1B: Is a scope
exception available? (VE 2.2)</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Yes &#8211;
Apply other appropriate GAAP.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">No
&#8211; Proceed to step 1C.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">The VIE model provides the following
scope exception (the &#8220;business scope exception&#8221;) for reporting enterprises with
variable interests in an entity:</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">Excerpt from FAS 167 Appendix
D:</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">4.h. An entity that is deemed to be a
business under the definition of</font><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">FASB Statement No. 141 (revised 2007),
Business Combinations</font><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">(ASC 805), need not be evaluated by a
reporting enterprise to</font><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">determine if the entity is a variable
interest entity under the</font><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">requirements of this Interpretation
unless </font><font style="DISPLAY: inline; FONT-WEIGHT: bold; COLOR: #000000">one or
more</font><font style="DISPLAY: inline; COLOR: #000000"> of the</font><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">following conditions exist (however, for
entities that are excluded</font><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">by this provision of this
Interpretation, other generally accepted</font><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">accounting principles should be
applied):</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">(1) The reporting enterprise, its
related parties,</font><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">or both</font><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">participated significantly in the design
or redesign of the entity.</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">However, this condition does not apply
if the entity is an</font><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">operating joint venture under joint
control of the reporting</font><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">enterprise and one or more independent
parties or a</font><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">franchisee.</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">(2) The entity is designed so that
substantially all of its activities</font><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">either involve or are conducted on
behalf of the reporting</font><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">enterprise and its related
parties.</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">(3) The reporting enterprise and its
related parties provide more</font><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">than half of the total of the equity,
subordinated debt, and other</font><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">forms of subordinated financial support
to the entity based on</font><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">an analysis of the fair values of the
interests in the entity.</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">(4) The activities of the entity are
primarily related to</font><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">securitizations or other forms of
asset</font><font style="DISPLAY: inline; COLOR: #000000">.</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">2</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">
      <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><img src="v191816_logo.jpg" alt=""></div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-STYLE: italic; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">What is a
&#8220;Business&#8221;?</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">In order to apply the business scope
exception, the reporting enterprise must</font><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">determine whether or not the entity is a
business. The guidance for accounting for</font><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">business combinations is located in ASC
805, </font><font style="DISPLAY: inline; COLOR: #000000; FONT-STYLE: italic">Business
Combinations </font><font style="DISPLAY: inline; COLOR: #000000">(ASC
805).</font><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">ASC 805-10-55-4 through 55-9 state that
the definition of a business for use in the</font><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">VIE model is as
follows:</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">Excerpts from ASC
805-10:</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">ASC 805-10-20: A business as an
integrated set of activities and assets</font><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">that is capable of being conducted and
managed for the purpose of</font><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">providing a return in the form of
dividends, lower costs, or other</font><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">economic benefits directly to investors
or other owners, members, or</font><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">participants.</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">ASC 805-10-55-4: A business consists of
inputs and processes applied</font><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">to those inputs that have the ability to
create outputs. Although businesses usually have outputs, outputs are not
required for an integrated set to qualify as a business. The three elements of a
business are defined as follows:</font></font></div>
    <div style="TEXT-ALIGN: justify">
    </div>
    <div style="TEXT-ALIGN: justify">
    </div>
    <div style="TEXT-ALIGN: justify">
      <div style="TEXT-ALIGN: justify" align="center">
        <table border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="TEXT-ALIGN: justify">
            <tr valign="top" style="TEXT-ALIGN: justify;">
              <td style="WIDTH: 30px; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
              <td style="WIDTH: 18px; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">a.</font></td>
              <td width="880" style="TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">Input. Any economic resource that
      creates, or has the ability to create, outputs when one or more processes
      are applied to it.</font></font></font></td>
            </tr>
            <tr valign="top">
              <td style="WIDTH: 30px; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
              <td style="WIDTH: 18px; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">b.</font></td>
              <td width="880" style="TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">Process. Any system, standard,
      protocol, convention, or rule that, when applied to an input or inputs,
      creates or has the ability to create outputs.</font></font></font></td>
            </tr>
            <tr valign="top">
              <td style="WIDTH: 30px; TEXT-ALIGN: justify">
                <div style="TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></div>
              </td>
              <td style="WIDTH: 18px; TEXT-ALIGN: justify">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">c.</font></font></div>
              </td>
              <td width="880" style="TEXT-ALIGN: justify">
                <div style="TEXT-ALIGN: justify" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">Output: The result of inputs and
      processes applied to those inputs</font><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">that provide or have the
      </font><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">ability to provide a return in the
      form of</font><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">dividends, lower costs, or other
      economic benefits directly to</font><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">investors or other owners,
      members, or
participants.</font></font></div>
              </td>
            </tr>
        </table>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">ASC 805-10-55-5: To be capable of being
conducted and managed for</font><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">the purposes defined, an integrated set
of activities and assets requires</font><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">two essential elements&#8212;inputs and
processes applied to those inputs</font><font style="DISPLAY: inline; COLOR: #000000">, </font><font style="DISPLAY: inline; COLOR: #000000">which together are or will be used to
create outputs.</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #ff0000">According to the above definition, USSI
is a business</font><font style="DISPLAY: inline; COLOR: #ff0000">.</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
mentioned above, the entity that meets the definition of a business does not
need to be evaluated by the reporting enterprise unless one or more of the
following conditions are met:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-STYLE: italic; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000; TEXT-DECORATION: underline">Condition 1:
Design of the Entity</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Excerpt
from FAS 167 Appendix D:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.h(1)
The reporting enterprise, its related parties,3 or both participated
significantly in the design or redesign of the entity. However, this condition
does not apply if the entity is an</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">operating
joint venture under joint control of the reporting enterprise and one or more
independent parties or a franchisee.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">3</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><img src="v191816_logo.jpg" alt=""></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: center">
      <div align="justify">&#160;</div>
      <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #ff0000">Acorn did not significantly</font><font style="DISPLAY: inline; FONT-WEIGHT: bold; COLOR: #ff0000">&#160;</font><font style="DISPLAY: inline; COLOR: #ff0000">participate in the design of
USSI</font><font style="DISPLAY: inline; COLOR: #ff0000">.</font></font>&#160;</div>
    </div>
    <div>
      <div align="center">
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-STYLE: italic; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000; TEXT-DECORATION: underline">Condition 2:
The &#8220;Substantially All&#8221; Test</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Excerpt
from FAS 167 Appendix D:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.h(2)
The entity is designed so that substantially all of its activities either
involve or are conducted on behalf of the reporting enterprise and its related
parties.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #ff0000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #ff0000">Under the terms of the agreements with
USSI, the Company has the right to exercise its options to acquire the shares of
USSI. Those call options are fixed - price and as of today are &#8220;in the money&#8221;
(we conclude that since the Company had already exercised its first
installment).</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #ff0000">A </font><font style="DISPLAY: inline; COLOR: #ff0000">nonreciprocal, fixed-price or &#8220;in the
money&#8221; call option on the other investors&#8217; equity investments is one of the
&#8220;strong indicators&#8221; in the evaluation of the &#8220;substantially all&#8221; condition, that
may at times, be sufficient to support a conclusion that substantially all of
the activities of</font><font style="DISPLAY: inline; COLOR: #ff0000">&#160;</font><font style="DISPLAY: inline; COLOR: #ff0000">the entity either involves or is
conducted on behalf of the reporting enterprise.</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #ff0000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #ff0000">Another &#8220;strong indicator&#8221; is if the
entity performs research and development activities, and the reporting
enterprise has an economic interest (e.g., through a purchase option) in the
results</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #ff0000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #ff0000">of the research that constitutes
substantially all of the entity&#8217;s activities.</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #ff0000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #ff0000">USSI is developing for number of
projects/applications. As the product develops and has increasing success
(passing trial tests), which for Acorn validates the product, it will continue
to exercise the options. Thus far, they continue to progress and Acorn has
exercised its first option.</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #ff0000">Acorn has an economic interest
</font><font style="DISPLAY: inline; COLOR: #ff0000">through its &#8220;in the money&#8221;
call options </font><font style="DISPLAY: inline; COLOR: #ff0000">in the results
of the product development</font><font style="DISPLAY: inline; COLOR: #ff0000">
that constitute </font><font style="DISPLAY: inline; COLOR: #ff0000">substantially all of USSI
activities</font><font style="DISPLAY: inline; COLOR: #ff0000">.</font><font style="DISPLAY: inline; COLOR: #ff0000">&#160;</font><font style="DISPLAY: inline; COLOR: #ff0000">Therefore </font><font style="DISPLAY: inline; COLOR: #ff0000">we can conclude that substantially all
of USSI activities involve Acorn.</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">4</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><img src="v191816_logo.jpg" alt=""></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: center">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Step 1C: Does the reporting
enterprise have a variable interest in the entity? (VE 3)</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Yes &#8211;
Proceed to step 2.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">No &#8211;
Apply other appropriate GAAP.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Variable
interests are not limited solely to equity investments. The excerpt below
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">clarifies
this point:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Excerpt
from FAS 167 Appendix D:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.&#160;&#160;
The investments or other interests that will absorb portions of a variable
interest entity&#8217;s expected losses or receive portions of the entity&#8217;s expected
residual returns are called variable interests.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #ff0000">Acorn does have a variable interest in
USSI</font><font style="DISPLAY: inline; COLOR: #ff0000"> (equity investment of
$500k and a call options).</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">STEP 2: Determine if the
entity is a VIE.</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Step
2A: Consider the appropriate determination date and the equity investment at
risk. (VE 4.1)</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #ff0000">The determination date is the February
23, 2010</font><font style="DISPLAY: inline; COLOR: #ff0000">, the signing of
the agreement between USSI and Acorn</font><font style="DISPLAY: inline; COLOR: #ff0000">.</font></font><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Step
2B: Determine if the equity investment at risk has any of the five
characteristics of a VIE. (VE 4.2)</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Characteristic
1: Is the equity investment at risk insufficient to finance the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">activities
of the entity? (VE 4.2.1)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Characteristic
2: Do the holders of the equity investment at risk lack power to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">direct
activities that most significantly impact the entity&#8217;s </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">performance?
(VE 4.2.2)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Characteristic
3: Was the entity established with non-substantive voting rights?</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(VE
4.2.3)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Characteristic
4: Do parties other than the holders of the equity investment at risk
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">have the
obligation to absorb expected losses? (VE 4.2.4)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Characteristic
5: Do parties other than the holders of the equity investment at risk
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">have the
right to receive the residual returns? (VE 4.2.5)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">_______________________</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If the
answer to all of the above questions is &#8220;no,&#8221; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
entity is not a VIE. Apply other appropriate GAAP.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If the
answer to any of the questions is &#8220;yes,&#8221; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">proceed
to step 3 to identify the primary beneficiary.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">5</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="justify"><img src="v191816_logo.jpg" alt=""></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Characteristic
1: Is the equity investment at risk insufficient to finance the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">activities
of the entity? (VE 4.2.1)</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Calculating
the Equity Investment at Risk</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
following provides an overview of how the amount of equity investment at
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">risk in
an entity is calculated:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">GAAP
equity investment (i.e., fair value of the equity)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Less:
Equity investments that do not participate significantly in the</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">entity&#8217;s
profits and losses</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Less:
Equity investments in an entity that are the source of</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">subordinated
financial support for another VIE</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Less:
Equity investments provided to the equity investor by the entity</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">or other
parties involved with the entity</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Less:
Equity investments financed for the equity investor by the entity</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">or other
parties involved with the entity</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Equals:
Equity investment at risk (at fair value)</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #ff0000">As at February 23, 2010 (according to
USSI's trial balance), USSI's has an equity of </font><font style="DISPLAY: inline; COLOR: #ff0000">$</font><font style="DISPLAY: inline; COLOR: #ff0000">40 (after a deduction of </font><font style="DISPLAY: inline; COLOR: #ff0000">$225 </font><font style="DISPLAY: inline; COLOR: #ff0000">preferred stock investments, that
don</font><font style="DISPLAY: inline; COLOR: #ff0000">&#8217;</font><font style="DISPLAY: inline; COLOR: #ff0000">t participate significantly in the
USSI</font><font style="DISPLAY: inline; COLOR: #ff0000">&#8217;</font><font style="DISPLAY: inline; COLOR: #ff0000">s profits and losses) - thus equity
investment does not appear to be sufficient to finance the activities of the
Company.</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">STEP 3: Determine which
enterprise is the primary beneficiary (i.e., which </font></font><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">enterprise should
consolidate the VIE).</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Step
3A: Identify all other enterprises that hold variable interests in the VIE. (VE
1 and VE 5.1)</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #ff0000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #ff0000">Below is a table showing all other
variable interests in USSI. It should be noted that the table is based on a
fully diluted bases and that the interest by RAE is in warrants in the Company
that have not been exercised.</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div>
      <div align="center">
        <table cellpadding="0" cellspacing="0" width="70%">
            <tr>
              <td valign="top" width="35%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td valign="top" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td valign="top" width="13%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            </tr>
            <tr>
              <td align="left" valign="top" width="35%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 54pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">James K.
      Andersen</font></font></div>
              </td>
              <td align="right" valign="top" width="9%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">370,000</font></font></div>
              </td>
              <td align="right" valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">25.2%</font></font></div>
              </td>
            </tr>
            <tr>
              <td align="left" valign="top" width="35%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 54pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">Gerald R.
    Baker</font></font></div>
              </td>
              <td align="right" valign="top" width="9%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">60,000</font></font></div>
              </td>
              <td align="right" valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">4.1%</font></font></div>
              </td>
            </tr>
            <tr>
              <td align="left" valign="top" width="35%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 54pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">Agop
      Cherbettchian</font></font></div>
              </td>
              <td align="right" valign="top" width="9%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">30,000</font></font></div>
              </td>
              <td align="right" valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">2.0%</font></font></div>
              </td>
            </tr>
            <tr>
              <td align="left" valign="top" width="35%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 54pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">CKSW
    Partners</font></font></div>
              </td>
              <td align="right" valign="top" width="9%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">63,000</font></font></div>
              </td>
              <td align="right" valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">4.3%</font></font></div>
              </td>
            </tr>
            <tr>
              <td align="left" valign="top" width="35%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 54pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">Eric L.
    Goldner</font></font></div>
              </td>
              <td align="right" valign="top" width="9%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">120,000</font></font></div>
              </td>
              <td align="right" valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">8.2%</font></font></div>
              </td>
            </tr>
            <tr>
              <td align="left" valign="top" width="35%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 54pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">LWL Investment Group </font><font style="DISPLAY: inline; COLOR: #000000">L</font><font style="DISPLAY: inline; COLOR: #000000">LC</font></font></div>
              </td>
              <td align="right" valign="top" width="9%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">&#160;</font><font style="DISPLAY: inline; COLOR: #000000">125,786</font></font></div>
              </td>
              <td align="right" valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">8.6%</font></font></div>
              </td>
            </tr>
            <tr>
              <td align="left" valign="top" width="35%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 54pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">Sulhbir
    Pannu</font></font></div>
              </td>
              <td align="right" valign="top" width="9%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">25,000</font></font></div>
              </td>
              <td align="right" valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">1.7%</font></font></div>
              </td>
            </tr>
            <tr>
              <td align="left" valign="top" width="35%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 54pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">Kevin Ryu</font></font></div>
              </td>
              <td align="right" valign="top" width="9%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">4,000</font></font></div>
              </td>
              <td align="right" valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">0.3%</font></font></div>
              </td>
            </tr>
            <tr>
              <td align="left" valign="top" width="35%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 54pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">Dan D.
      Tomlinson</font></font></div>
              </td>
              <td align="right" valign="top" width="9%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">17,625</font></font></div>
              </td>
              <td align="right" valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">1.2%</font></font></div>
              </td>
            </tr>
            <tr>
              <td align="left" valign="top" width="35%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 54pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">Stephen
    Whang</font></font></div>
              </td>
              <td align="right" valign="top" width="9%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">15,578</font></font></div>
              </td>
              <td align="right" valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">1.1%</font></font></div>
              </td>
            </tr>
            <tr>
              <td align="left" valign="top" width="35%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 54pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">Howard F.
      Wilkinson</font></font></div>
              </td>
              <td align="right" valign="top" width="9%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">8,000</font></font></div>
              </td>
              <td align="right" valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">0.5%</font></font></div>
              </td>
            </tr>
            <tr>
              <td align="left" valign="top" width="35%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 54pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">Philip W. Colburn -
      preferred</font></font></div>
              </td>
              <td align="right" valign="top" width="9%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">94,338</font></font></div>
              </td>
              <td align="right" valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">6.4%</font></font></div>
              </td>
            </tr>
            <tr>
              <td align="left" valign="top" width="35%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 54pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">Michael Schwartz-
      preferred</font></font></div>
              </td>
              <td align="right" valign="top" width="9%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">94,338</font></font></div>
              </td>
              <td align="right" valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">6.4%</font></font></div>
              </td>
            </tr>
            <tr>
              <td align="left" valign="top" width="35%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 54pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">Jeffery Paul -
      preferred</font></font></div>
              </td>
              <td align="right" valign="top" width="9%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">94,338</font></font></div>
              </td>
              <td align="right" valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">6.4%</font></font></div>
              </td>
            </tr>
            <tr>
              <td align="left" valign="top" width="35%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 54pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">RAE - preferred
      (warrants)</font></font></div>
              </td>
              <td align="right" valign="top" width="9%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">200,000</font></font></div>
              </td>
              <td align="right" valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">13.6%</font></font></div>
              </td>
            </tr>
        </table>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">6</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><img src="v191816_logo.jpg" alt=""></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br>&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Step
3B: Combine all variable interests with the variable interests that are
</font><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-SIZE: 10pt">held by related parties and de facto
agents. (VE 1 and VE 5.1</font><font style="DISPLAY: inline; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">)</font></font><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #ff0000">There are no related parties to Acorn
with variable interests in USSI</font><font style="DISPLAY: inline; COLOR: #ff0000">.</font></font><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Step
3C: Determine if the reporting enterprise fulfils both of the following criteria
required to be a primary beneficiary. (VE 5.1)</font><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Power
Criterion</font>: Does the reporting enterprise on its own (and if not on its
own, its related parties and de facto agents group) have the power to direct the
activities of the VIE that most significantly impact the entity's economic
performance?</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If the
answer to the above question is &#8220;no,&#8221; the reporting enterprise is not the
primary beneficiary. Proceed to step 4C.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If the
answer to the above question is &#8220;yes,&#8221; proceed to the question
below.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Evaluation of Call Options
in Assessing the Power of an Entity</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In many
cases, the existence of the call option will not impact the analysis of power;
however, we do believe that call options should be carefully considered to
determine if the substance of the call option gives the holder the power to make
decisions that most significantly impact the economic performance of the VIE. If
the call is currently exercisable, we believe that the following factors should
be considered in making this evaluation:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8226; The
strike price and other key terms of the call option. If the call option has an
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">exercise
price at fair value instead of an exercise price based on a fixed price or
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">formula,
it would be highly unlikely that the call option in and of itself would
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">provide
the holder with power. However, if the option&#8217;s exercise price is based a
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">fixed
amount or on a formula, the intrinsic value of the option should be </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">considered.
In situations in which the option is deep-in-the money, it may be likely
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">that the
substance of the arrangement is that the holder of the option has power
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">over the
entity.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #ff0000">Acorn&#8217;s call option</font><font style="DISPLAY: inline; COLOR: #ff0000">s</font><font style="DISPLAY: inline; COLOR: #ff0000"> has an exercise price </font><font style="DISPLAY: inline; COLOR: #ff0000">that </font><font style="DISPLAY: inline; COLOR: #ff0000">based on a fixed price and currently the
option</font><font style="DISPLAY: inline; COLOR: #ff0000">s</font><font style="DISPLAY: inline; COLOR: #ff0000"> is in the money (Acorn had already
exercised </font><font style="DISPLAY: inline; COLOR: #ff0000">its first
option</font><font style="DISPLAY: inline; COLOR: #ff0000">). As USSI
continue</font><font style="DISPLAY: inline; COLOR: #ff0000">s</font><font style="DISPLAY: inline; COLOR: #ff0000"> to progress and pass trial tests, the
value of the option will increase and </font><font style="DISPLAY: inline; COLOR: #ff0000">it</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000099">&#160;</font><font style="DISPLAY: inline; COLOR: #ff0000">is reasonable to assume that</font><font style="DISPLAY: inline; COLOR: #ff0000"> during the following year, </font><font style="DISPLAY: inline; COLOR: #ff0000">the option would be deep-in-the
money.</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">7</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><img src="v191816_logo.jpg" alt=""><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8226; The
significance and importance of the holder of the option&#8217;s potential ownership
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">in the
entity. For example, if the VIE&#8217;s activities are of the utmost importance to
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
holder&#8217;s ongoing business, there is a greater potential for the holder to
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">effectively
influence the entity. However, in most cases, the level of influence will
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">not be so
great as to allow the holder to have the ability to make decisions that
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">most
significantly impact the economic performance of the entity.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #ff0000">USSI activities are not of the utmost
importance to the Acorn&#8217; business and Acorn is not dependent on USSI for it
ongoing business</font><font style="DISPLAY: inline; COLOR: #ff0000">.</font><font style="DISPLAY: inline; COLOR: #ff0000">&#160;</font><font style="DISPLAY: inline; COLOR: #ff0000">Given, the method of Acorn&#8217;s operations
(investing in companies and helping them develop), USSI&#8217;s activities are not of
the utmost importance to Acorn (since there are other companies in Acorn&#8217;s
portfolio), but USSI&#8217;s development is definitely of importance.</font><font style="DISPLAY: inline; COLOR: #ff0000">&#160;</font><font style="DISPLAY: inline; COLOR: #ff0000">It is expected that </font><font style="DISPLAY: inline; COLOR: #ff0000">Acorn&#8217;s </font><font style="DISPLAY: inline; COLOR: #ff0000">ultimate </font><font style="DISPLAY: inline; COLOR: #ff0000">goal is to own a majority </font><font style="DISPLAY: inline; COLOR: #ff0000">of USSI, and accordingly</font><font style="DISPLAY: inline; COLOR: #ff0000">, we can say that USSI&#8217;s success is
important to </font><font style="DISPLAY: inline; COLOR: #ff0000">Acorn</font><font style="DISPLAY: inline; COLOR: #ff0000">.</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8226; The
overall level of control held by the holder of the option based on the existence
of the call option by itself or with other variable interests held by the holder
(including its related parties/de facto agents).</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #ff0000">Acorn does exert some level of
influence</font><font style="DISPLAY: inline; COLOR: #ff0000">/control</font><font style="DISPLAY: inline; COLOR: #ff0000"> at USSI</font><font style="DISPLAY: inline; COLOR: #ff0000"> as evidenced by its having a Board
representative (John Moore) and its involvement in the development of the
business (visits by Acorn&#8217;s CTO David Beatson). Acorn&#8217;s involvement with USSI as
a 10% shareholder is no less than its involvement in other entities in it&#8217;s
portfolio where it is a majority shareholder &#8211; this supports the notion that
Acorn&#8217;s expected ultimate goal is to have actual legal (&gt;50% holding) in USSI
which it can do by virtue of the existence of the option.</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8226; The
overall importance of the holder&#8217;s operations to the ongoing business activities
of the VIE. The greater the level of importance to the VIE&#8217;s dependence on the
holder to conduct its business activities may effectively provide the holder
with power over the entity.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #ff0000">As discussed in step 2B above, USSI&#8217;s
equity would not be sufficient to finance the company&#8217;s ongoing business. Due to
this fact and the understanding that USSI has no other significant sources of
financing, we assume that level of the USSI dependence on Acorn</font><font style="DISPLAY: inline; COLOR: #ff0000">&#8217;s</font><font style="DISPLAY: inline; COLOR: #ff0000"> investment </font><font style="DISPLAY: inline; COLOR: #ff0000">and support </font><font style="DISPLAY: inline; COLOR: #ff0000">in order to accomplish the development
of </font><font style="DISPLAY: inline; COLOR: #ff0000">USSI&#8217;s</font><font style="DISPLAY: inline; COLOR: #ff0000"> projects and conduct its business
activities is high.</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8226; The
existence of barriers to exercise the option. A careful consideration of factors
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">that
could prevent or limit the ability of the holder to exercise the call option
(e.g., </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">due to
illiquidity, regulatory concerns or other factors) may lead to a conclusion
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">that the
holder does not have the power over the entity through its call
option.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #ff0000">There are no barriers to </font><font style="DISPLAY: inline; COLOR: #ff0000">the </font><font style="DISPLAY: inline; COLOR: #ff0000">exercise </font><font style="DISPLAY: inline; COLOR: #ff0000">of </font><font style="DISPLAY: inline; COLOR: #ff0000">the call option.</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8226; The
existence of conditions such that it would not be prudent, feasible and
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">substantially
within the control of the holder of the call to exercise the call option
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(e.g.,
the counter-party to the call option controls technology that is critical to the
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">VIE or
the counter-party to the call option is the principal source of funding for
the</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">VIE).</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">8</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><img src="v191816_logo.jpg" alt=""></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br>&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #ff0000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #ff0000">There no such
conditions.</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If the
call option can only be exercised when a substantive contingency occurs, we
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">do not
believe that the call options should be considered in the power criterion
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">evaluation
until the contingency is resolved (i.e., at the point in time that the call is
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">exercisable).
Additionally, if the call is not currently exercisable merely due to the
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">passage
of time (e.g., call option that is exercisable after year 5), then it is not
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">considered
in the power criterion evaluation until it is exercisable. In effect both of
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">these
scenarios would be situations in which it is important to perform an ongoing
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">analysis.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #ff0000">Two </font><font style="DISPLAY: inline; COLOR: #ff0000">scenarios </font><font style="DISPLAY: inline; COLOR: #ff0000">that described above </font><font style="DISPLAY: inline; COLOR: #ff0000">are not relevant to Acorn. </font><font style="DISPLAY: inline; COLOR: #ff0000">In fact, with respect to the time aspect
of the option described above, the opposite is true and the options must be
exercised serially and over a relatively short period of time (actual control
would be gained by August 2010).</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Additionally,
cash settled call options should not impact the analysis since these do
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">not give
the holder any rights to make decisions that significantly impact the
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">economic
performance of the VIE.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #ff0000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #ff0000">Acorn&#8217;s call option is not cash
settled.</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In all of
the scenarios described above, it is assumed that the call option gives the
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">holder
the right to obtain power upon exercise. There can be some limited situations
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">in which
the holder of the call option may have voting rights or other decision making
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">rights
that legally exist in the call option itself (e.g., upon executing the call
option, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
holder may be granted the ability to elect board of directors of the VIE). In
those </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">cases,
the rights granted should be considered in the evaluation of the power
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">criterion.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #ff0000">Based on the abovementioned
fac</font><font style="DISPLAY: inline; COLOR: #ff0000">tors</font><font style="DISPLAY: inline; COLOR: #ff0000">, it is management&#8217;s conclusion that
Acorn&#8217;s call option gives </font><font style="DISPLAY: inline; COLOR: #ff0000">it </font><font style="DISPLAY: inline; COLOR: #ff0000">the power to make decisions that most
significantly impact the economic performance of the VIE. </font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">9</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
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      </div>
      <div id="HDR">
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      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><img src="v191816_logo.jpg" alt=""><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: center">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Losses/Benefits
Criterion</font>:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Does the
reporting enterprise (and if not on its own, its related parties and de facto
agents group) have the obligation to absorb losses of the entity that could
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">potentially
be significant to the VIE or the right to receive benefits from the entity that
could potentially be significant to the VIE?</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If the
answer to the above question is &#8220;yes,&#8221; proceed to Step 3D.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If the
answer to the above question is &#8220;no,&#8221; the reporting enterprise is not the
primary beneficiary. Proceed to step 4C</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Losses/Benefits
Criterion</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If an
enterprise has met the power criterion, it will then need to determine whether
it </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">has the
obligation to absorb losses of the entity that could potentially be significant
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to the
variable interest entity or the right to receive benefits from the entity that
could </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">potentially
be significant to the variable interest entity. Both the power criterion and
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
losses/benefits criterion are required for the enterprise to be the primary
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">beneficiary
of the VIE.&#160; </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Under the
new guidance, determining whether an enterprise has the obligation to
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">absorb
losses of or the right to receive benefits from the VIE that could be
potentially </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">significant
to the VIE is not based on a quantitative expected loss/expected residual
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">return
calculation required under the previous model. Rather, this assessment is
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">intended
to be a qualitative judgment-based analysis which considers all of the facts
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">and
circumstances about the terms and characteristics of the variable interest(s),
the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">design
and characteristics of the VIE and the other involvement that the enterprise
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-SIZE: 10pt">may have with the VIE</font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman">.</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #ff0000">As discussed in step 2B above, USSI&#8217;s
equity would not be sufficient to finance the company&#8217;s ongoing business. As of
February </font><font style="DISPLAY: inline; COLOR: #ff0000">28, </font><font style="DISPLAY: inline; COLOR: #ff0000">2010, USSI&#8217;s total assets are about
</font><font style="DISPLAY: inline; COLOR: #ff0000">$</font><font style="DISPLAY: inline; COLOR: #ff0000">417 (including Acorn&#8217;s $300
investment)</font><font style="DISPLAY: inline; COLOR: #ff0000"> and
</font><font style="DISPLAY: inline; COLOR: #ff0000">other than </font><font style="DISPLAY: inline; COLOR: #ff0000">Acorn&#8217;s</font><font style="DISPLAY: inline; COLOR: #ff0000">&#160;</font><font style="DISPLAY: inline; COLOR: #ff0000">call options there </font><font style="DISPLAY: inline; COLOR: #ff0000">are </font><font style="DISPLAY: inline; COLOR: #ff0000">no other significant sources of
financing. Acorn is not obligated to absorb any losses, but </font><font style="DISPLAY: inline; COLOR: #ff0000">it would likely support USSI during the
development and trial tests of their product.</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #ff0000">The losses/benefits criterion also
requires the enterprise to consider that although it may not have rights or
obligations that are currently</font><font style="DISPLAY: inline; COLOR: #ff0000">&#160;</font><font style="DISPLAY: inline; COLOR: #ff0000">significant, its variable interest may
provide it with obligations or rights that may be</font><font style="DISPLAY: inline; COLOR: #ff0000">&#160;</font><font style="DISPLAY: inline; COLOR: #ff0000">significant to the VIE in the future
even under seemingly </font><font style="DISPLAY: inline; COLOR: #ff0000">improbable scenarios. Therefore, under
the assumption that Acorn will exercise its call option</font><font style="DISPLAY: inline; COLOR: #ff0000">s</font><font style="DISPLAY: inline; COLOR: #ff0000"> and own a majority in USSI, it would
receive benefits from USSI that could be potentially</font><font style="DISPLAY: inline; COLOR: #ff0000">&#160;</font><font style="DISPLAY: inline; COLOR: #ff0000">significant to USSI.</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #ff0000">Based on the analysis above, it is
management&#8217;s conclusion that Acorn has a controlling</font><font style="DISPLAY: inline; COLOR: #ff0000"> f</font><font style="DISPLAY: inline; COLOR: #ff0000">inancial interest in USSI and must
consolidate it in its financial statements</font><font style="DISPLAY: inline; COLOR: #ff0000"> effective February 23, 2010 (the date
of the signing of the investment agreement)</font><font style="DISPLAY: inline; COLOR: #ff0000">.</font></font></div>
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