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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(9)</font></div>
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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman; TEXT-DECORATION: underline"><font style="DISPLAY: inline">Income Taxes</font></font></div>
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<td valign="top" width="95%" style="TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&nbsp; </font></td>
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<td valign="top" width="5%" style="TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&nbsp; </font></td>
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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">The Company did not record a benefit for federal, state and local income taxes for the three months ended June 30, 2010 and 2009 because any such benefit would be fully offset by an increase in the valuation allowance against the Company’s net deferred tax asset established as a result of our historical operating losses.</font></div>
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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(10)</font></div>
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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman; TEXT-DECORATION: underline"><font style="DISPLAY: inline">Derivative Complaint</font></font></div>
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<td valign="top" width="95%" style="TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&nbsp; </font></td>
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<td valign="top" width="5%" style="TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&nbsp; </font></td>
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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">On May<font style="DISPLAY: inline; FONT-STYLE: italic">&nbsp;</font>7,<font style="DISPLAY: inline; FONT-STYLE: italic">&nbsp;</font>2010, Brian Murphy, derivatively on behalf of the Company, commenced a lawsuit in the Supreme Court of the State of New York, County of New York, against the Chairman of the Company’s Board of Directors, certain former directors and officers of the Company, and the Company as a nominal defendant. The Complaint filed by Mr. Murphy in the action alleges, among other things, that the defendants breached fiduciary duties owed to the Company and its stockholders by failing to ensure that the Company’s financial statements for its fiscal year ended March 31, 2008 and quarter ended June 20, 2008 were prepared correctly, and by causing the Company to enter into the December 2009 financing on terms dilutive to the Company’s stockholders. The Company is a nominal defendant for purposes of the derivative action claims, and is not aware of any claims for affirmative relief being made against it. However, the Company has obligations to provide indemnification to its officers and directors (and former officers and directors), including for all legal costs incurred by them in defending these claims. On June 30, 2010 the defendants filed a motion to dismiss the Complaint, which motion is currently pending before the court. The Company believes the lawsuit is without merit and intends to defend this action vigorously. However, the ultimate outcome of any litigation is uncertain and could result in substantial damages<a name="eolpage3"><!--efplaceholder--></a>. Through the quarter ended June 30, 2010, the Company had incurred approximately $175,000 in legal expenses in connection with its defense of the lawsuit and its indemnification obligations.</font></div>
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<div><font>(9)</font></div>
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<div><font><font>Income Taxes</font></font></div>
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<div><font>The Company did not record a benefit for federal, state and local income taxes for the three months ended June 30, 2010 and 2009 because any such benefit would be fully offset by an increase in the valuation allowance against the Company’s net deferred tax asset established as a result of our historical operating losses.</font></div>
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<div><font>(10)</font></div>
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<div><font><font>Derivative Complaint</font></font></div>
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<div><font>On May<font> </font>7,<font> </font>2010, Brian Murphy, derivatively on behalf of the Company, commenced a lawsuit in the Supreme Court of the State of New York, County of New York, against the Chairman of the Company’s Board of Directors, certain former directors and officers of the Company, and the Company as a nominal defendant. The Complaint filed by Mr. Murphy in the action alleges, among other things, that the defendants breached fiduciary duties owed to the Company and its stockholders by failing to ensure that the Company’s financial statements for its fiscal year ended March 31, 2008 and quarter ended June 20, 2008 were prepared correctly, and by causing the Company to enter into the December 2009 financing on terms dilutive to the Company’s stockholders. The Company is a nominal defendant for purposes of the derivative action claims, and is not aware of any claims for affirmative relief being made against it. However, the Company has obligations to provide indemnification to its officers and directors (and former officers and directors), including for all legal costs incurred by them in defending these claims. On June 30, 2010 the defendants filed a motion to dismiss the Complaint, which motion is currently pending before the court. The Company believes the lawsuit is without merit and intends to defend this action vigorously. However, the ultimate outcome of any litigation is uncertain and could result in substantial damages<!--efplaceholder-->. Through the quarter ended June 30, 2010, the Company had incurred approximately $175,000 in legal expenses in connection with its defense of the lawsuit and its indemnification obligations.</font></div>
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