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[loui2005]

NS8 Corporation Plans Pilot Program Testing with Several Broadband ISP and Wireless Hotspot Providers for its iWave Interactive Services
9/29/2005 5:18:01 PM





SEATTLE, Sep 29, 2005 (BUSINESS WIRE) -- NS8 Corporation (NSEO) announces that several broadband internet service providers(ISPs) located in Washington, Arizona, North Carolina and Colorado plan to participate in pilot program testing of the Company`s new digital entertainment on-demand services.

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These ISPs serve residential metropolitan hotspot, and commercial markets reaching approximately 736,000 subscribers over DSL, fiber and wireless networks. NS8 now moves one step closer to accomplishing one of its primary goals of providing encrypted digital entertainment to both the home and wireless hotspots " The entertainment content and technologies from NS8 represent a tremendous service and revenue opportunity for broadband providers," says Bill MacNamara, CEO of Canyon Broadband, Inc. " These additional services provide a competitive edge for customer acquisition and subscriber retention," says Mark Sullivan of LocalTel Communications, Inc. This pilot program testing of iWave(TM) is planned to be implemented by late November. Each of these broadband providers have agreed to assist in the essential backend integration and process management for their subscribers, as well as giving end-user feedback which will enable NS8 to refine iWave(TM) for the home, and mobile broadband consumer.

The participants will be viewing specialty content ranging from travel, education, history, anime, music, concerts and extreme sports. Using NS8`s Interactive Services offers an alternative to installing multiple set-top boxes, the use of media appliances, or paying expensive subscriptions in order to receive dedicated media content. NS8 intends to provide premium studio and production content in early 2006 once the pilot testing has been successfully completed.

About NS8 Corporation

NS8 Corporation (www.ns8corp.net) is a Multimedia Entertainment Technology Services Company based in Seattle, WA, USA with Research & Development facilities in Canada. NS8 Specializes in the development of server-based software technologies in the areas of smart encryption, content licensing and royalty distribution management, including interactive consumer experience viewing systems for Internet media on-demand applications for PC, IPTV and other portable media devices. NS8`s products are built around a highly integrated and scalable IP technology platform to ensure end to end security distribution and revenue management of content from creation to consumer delivery using personal computers, IP Set-top boxes, PVR or any IP compatible portable media device.

iWave Interactive Systems is an NS8 product line that combines its proprietary security software architecture and server based technologies for use by content owners, media distributors, digital storage facilities, digital asset management firms and interactive service providers such as streaming or still image advertisers, food delivery services and catalogue merchant retailers. iWave provides these business sectors with a cost efficient automation solution for processing distribution licenses, territorial viewing policies, consumer recording and transfer rights, payment collection and media usage auditing, service or merchandise ordering, and royalty management. iWave also offers an interactive consumer menu system that can integrate with existing middleware systems for on-demand functionality and provides automated private-label and brand management capabilities that can be accessed by a consumer from any PC, MAC, WiFi or digital set-top box environment.

Safe Harbor Statement

Certain statements made herein that are not historical are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the Company`s beliefs and the assumptions it made using information currently available to it. Because these statements reflect the Company`s current views concerning future events, these statements involve risks, uncertainties and assumptions. The actual results could differ materially from the results discussed in the forward-looking statements. In any event, undue reliance should not be placed on any forward-looking statements, which apply only as of the date of this press release.

Trademarks

Consumer Program and Shopping Guide, CPG, Library Distribution Management System, LDMS, NS8, Secure Digital Content Distribution, Security Protocol Integration, SPI, and iWAVE(TM) Interactive Systems, are either registered trademarks or trademarks of NS8 Corporation or its subsidiaries. The names of actual companies and products mentioned herein may be the trademarks of their respective owners.

NS8 Corporation (NSEO)

SOURCE: NS8 Corporation

NS8 Corporation
Brad Long
Investor Relations
1-888-240-NSEO (6736) or [phone]
Fax: [phone]
[e-mail]
www.ns8corp.net

[RKLffm]

Was ist dann da LOS

[BlondBlauauge]

[auffigehts]

Was soll denn da LOS sein?
Alles was nicht angebunden ist ist LOS!

[slaughto]

...ns8 schwächelt, aber richtig. bin mal gespannt, wo der boden ist...

[siluro]

52 wochenhoch 0,91€€
wann kommen die wieder???????????
wäre so geillll

[Adler75]

Hallo wer kann mir sagen was los ist mit dieser Firma warum fählt die Aktien so ? Ist das Normal so wenn sie so tief fählt?

[beta77]

Meine Meinung: Risiko auf Totalverlust, aber auch Chance auf 2000%. NS8 stand dieses Jahr schon kurz vor dem Aus. Im Moment kann jeder, der nur ein paar Tausend Aktien oder ein paar Tausen EUROs/Dollars hat, mit dem Kurs
machen, was er will. Hoffe mal, das NS8 mit seiner letzten Kohle die Testphase erfolgreich meistert und natürlich einige Testkanditaten zum mitmachen gewinnt. Falls nicht, denke ich, kommt das Aus wohl Ende QI, aber das wollen wir mal nicht hoffen. Falls alles gelingt, die Tests gut ausfallen, das Produkt/die Dienstleistung einen akzeptablen Preis hat, ist es m.E. egal, ob man für 0,04/0,1 oder 0,2 Cent rein ist, denn dann geht`s in den Himmel.

Hoffen wir das beste. SL ist hier meiner Meinung nach aber auf jeden Fall ein Geldvernichter. Wer Mut zu hohem Risiko hat, sollte aber auch mal kurz die Augen schliessen können und ein paar Wochen/Monate Geduld mitbringen. Aber wie gesagt nochmal: Die Kohle kann auch ganz weg sein.

Ich bin dabei und glaube an NS8 (und hoffe....).
Drücke uns allen und NS8 beide Daumen. No risk......

[Adler75]

Eine Frage bist du schon lange dabei bei dieser firma mit Aktien? Möchte vieleicht auch einsteigen bin vorsichtig noch

[beta77]

[posting]18.598.667 von Adler75 am 05.11.05 13:21:27[/posting]Ja, bin schon etwas länger dabei, habe teilweise auch zu wesentlich höheren Kursen gekauft, aber den Kursrutsch zu Nachkäufen genutzt. Mein Durchschnit jetzt 0,1 Euro. Habe ja schon geschrieben: HighHigh-Risk aber auch RiesenRiesen-Chance. Also vielleicht mal mit einer kleinen Position reingehen, die bei Totalverlust gut verkraftet werden kann, denn Börse kann auch richtig weh tun. Denke (wie schon geschrieben), dass wir hier keine Bodenbildung sehen bzw. haben, denn auch mit wenig Geld oder Aktien kann der Kurs hier in beide Richtungen getrieben werden. Habe auch keinen SL gesetzt. Muss aber letztendlich jeder für sich selbst entscheiden, welches Risiko er einzugehen bereit ist. Ich werde jetzt nicht mehr nachkaufen, mein HighHigh-Risk-Kapital ist erschöpft und ich schaue mal hin und wieder hier vorbei, freue mich über steigende Kurse und heule nicht, falls es noch tiefer geht. Alles oder nichts!!!!

Viel Glück uns allen Investierten und denen, die es noch werden.

Grüsse M.

[petiteventre]

Halte meine NS8 weiterhin. Seltsam zu beobachten, dass die letzten Tage ständig 200-300k in den USA gehandelt werden. Es pendelt sich fast immer auf diesem Volumen ein.

Decken sich hier Insider billig ein?? Stehen vielleicht positive Nachrichten an (Auftragseingänge etc.)???

Abwarten - ich bleibe investiert.

[petiteventre]

Nur nochmals zu Erinnerung:

Ein Börsenbrief schreibt über das amerikanische Unternehmen NS8:

...Und der technologische Durchbruch scheint gelungen: In direkter Nachbarschaft zum Branchengiganten Microsoft hat das junge Softwareunternehmen NS8 Corp. [WKN A0BLGT/ ISIN US67020E1047] eine Technologie entwickelt, die den Inhalteanbietern die vollständige Kontrolle über ihren Content zurückgibt. NS8 Security Protocol Integration"! stellt sicher, dass Copyright und Lizenzen untrennbar mit dem digitalen Content verbunden sind, und dass der Inhaber dieser Rechte zu jedem Zeitpunkt weiß, wo im Netz sich seine Inhalte befinden (Real-Time-Tracking). Das könnte die Lösung sein, nach der die Unterhaltungsbranche im Kampf gegen die Internetpiraterie gesucht hat!...

[beta77]

[posting]18.974.487 von petiteventre am 25.11.05 07:22:23[/posting]Warten wir doch mal die Testphase ab. Leider steht nirgendwo, wie lange die noch dauert. Ich denke, dass die bestimmt ca. 3-3 Monate testen und optimieren werden. Falls die Tests dann positiv laufen, geht die Post ab. Oder vielleicht macht dann BillyBoy seine Portokasse auf....

[petiteventre]

22-Nov-2005

Quarterly Report



ITEM 2. MANAGEMENT`S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Product Overview



We are a multimedia entertainment technology company based in Seattle, Washington, USA, with research and development facilities in Vancouver, British Columbia, Canada. We specialize in the development of server-based software technologies in the areas of smart encryption, content licensing and royalty distribution management, including interactive consumer experience viewing systems for Internet media on-demand applications for personal computers (PC), Internet Protocol television (IPTV) and other portable media devices. Our products are built around a highly integrated and scalable Internet Protocol (IP) technology platform designed to ensure end-to-end security distribution and revenue management of content from creation to consumer delivery, using personal computers, IP set-top boxes, personal video recorders or other IP compatible media portal devices.

Our suite of software products addresses five growing concerns in the industry:


1. The inability of current security systems used in digital media distribution to effectively protect or maintain the streaming quality of media as it is delivered through the Internet to televisions and PC`s;

2. The inability of current media management and distribution systems to accurately account for proper usage and other consumer behavioural information as digital media is distributed by service providers to their consumers;

3. The inability of current media management and distribution systems to accurately capture revenue sharing allowances entitled to license holders every time digital media is consumed;

4. The inability of service providers using current media management and distribution systems to meet growing consumer demand for real-time access to digital media over television, personal computer and wireless devices; and

5. The inability of digital media owners to effectively maintain their ownership and assure their entitled licensing policies are enforced during the digital distribution of their media to consumer devices.

Our patent-pending technologies are comprised of software modules that seek to:
enhance security during distribution and consumer use; simplify the management and distribution of content through dynamic visual interfaces; increase delivery efficiency through normal broadband networks; automate the licensing process of content in a digital environment for multiple distribution by a content owner; ensure royalty and usage payment to all participating users; and provide overall quality of content to the consumer. These software modules can be applied as stand-alone server based solutions or combined to produce end-to-end consumer service portals.

The combined functionality of these technologies is offered in a comprehensive solution called iWave Interactive Systems. iWave is a product line that combines our proprietary security, behavioural network management systems, software architecture and server-based technologies for use by content owners, media distributors, digital storage facilities, digital asset management firms, interactive service providers, food delivery services and catalogue merchant retailers. iWave is able to provide these business sectors with a cost-efficient automation solution for processing distribution licenses, territorial viewing policies, consumer recording and transfer rights, payment collection and media usage auditing, service or merchandise ordering, and royalty management. iWave also offers an interactive consumer menu system that can integrate with existing middleware systems for on-demand functionality and provides automated private-label and brand management capabilities that can be accessed by consumers from their consumer television, personal and wireless computer devices.

Industry Overview



The overall global entertainment and media industry will increase at a 7.3% compound annual growth rate to $1.8 trillion in 2009, according to PricewaterhouseCoopers` report: Global Entertainment and Media Outlook:
2005-2009.

We believe that broadband Internet and wireless technologies will elicit new spending that will account for a large portion of the total growth in the industry. There are an estimated 85 million Digital Subscriber Line (DSL) subscribers worldwide (InternetWorldStats.com), 500,000 IPTV subscribers (CitiGroup IPTV Report, July, 2005), and in the US, nearly 80% of homes have at least one PC (Ipsos-Insight, Motion research project, as reported by Rider Research, June, 2005). Cable Service Providers are delivering well over 100 million video-on-demand (VOD) streams per month (Source: Comcast, as reported in the Wall Street Journal, November, 2005).

These changes, along with a shift in consumer preferences toward more portable and digital media have the entertainment and media industry looking at broadband distribution with fresh eyes. A recent Points North Group survey of over a thousand Internet users, found that 28% wanted to watch television shows on their PC`s and laptops (as reported by the NY Times, November 14, 2005).

The growth in interactive advertising, and the increasing transition of males aged 13 to 24 to the Internet as a source of entertainment has solidified the attractiveness of broadband distribution opportunities. U.S. Online advertising spending was estimated at almost $10 billion in 2004, and is projected to grow to almost $20 billion by 2007. (Source: ZenithOpimedia, as reported by Economist.com, April 27, 2005). So-called `rich media` ads featuring enhanced graphics and sound made up 39% of Internet ads for Fortune 500 companies in 2004 (Source: DoubleClick Releases Overview of Rich Media Market Trends, News Release, September 28, 2005).

Continued Commercial Strategy



During the three months ended September 30, 2005, we made essential competitive and industry required feature refinements to our iWave Interactive Systems. We have successfully completed development on the Amino set-top box hardware for digital distribution of MPEG2 and H264 content using our proprietary iWave consumer interface. We believe that this will enable our iWave system to not only be accessible by personal and wireless computer devices, but through a television device as well.

In addition, we have completed necessary industry driven refinements to our digital media management and distribution system (LDMS) that will control the entire iWave system for a service provider through a single control system. We believe that this will add greater economic benefits, industry adoptive qualities and marketable differentiators to our iWave product above existing competitive and similarly compared platforms.

These competitive and industry required enhancements to our iWave system have been precipitated from industry standardization requirements and feedback from our content and service provider relationships. Since our plan is to market and license the iWave system to Internet service providers and telecommunication companies offering IP-television and Internet services, these changes enabled us to further refine and simplify our business model while enhancing the economic benefits of iWave to those target markets.

During the later part of the three months ended September 30, 2005, we completed the hardware (headend) requirements of our iWave Interactive Systems. This allows us to tangibly deliver our iWave system as a preconfigured headend to our target markets for commercial use after we have concluded essential commercial and standardization tests in a non-simulated environment. By the delivery of iWave in a preconfigured headend package, we are able to save our customers significant installation and integration costs normally inherent in such commercial deployments. It also enables our customers to simplify any customization, distribution or maintenance management that continues to be a high cost of these types of systems today.

On September 29, 2005, we announced a pilot program with several broadband Internet service providers ("ISPs") to participate in the testing of our iWave Interactive Systems. These ISPs include Canyon Broadband, WisperTelecommunications, Inc., Tulsa Metro Net Network Services, Gladiator Network Services and OHH!TV. During this pilot program scheduled for early 2006, we plan to testand refine essential systems which could not be refined in a simulated commercial environment. We also plan to aggregate certain types of digital media in various distribution and high definition compression formats for testing over our internal and external SAVVIS network to a non-simulated consumer environment. In addition, we plan to obtain final service provider and consumer feedback information to complete our commercial benchmark assumptions of our hardware for full commercial deployment.

Contracts



On August 4 2005, we entered into a Master Services Agreement with SAVVIS Communications Corporation ("SAVVIS") pursuant to which we will jointly deliver a secure, IP-based, entertainment-on-demand platform. Under the terms of the Agreement, SAVVIS will provide hosting and network services to store, manage and deliver digital content over the Internet. We intend that the resulting integrated solution will provide a secure, IP-based, direct to consumer, digital content-on-demand platform that will be marketed to local telephone companies and independent ISPs as "iWave Interactive Media Distribution System". This platform is intended to enable customers to securely deliver video-on-demand, music, games and digital content to PC-based media devices.

Certificate of Registration of Trade-mark No. 1181601 was issued by the Register of Trade-marks of Canada certifying that the trade-mark CANONLINE has been registered in Canada to CanOnline Global Media, Inc. on September 13, 2005 under registration number TMA647,899. In accordance with the provisions of the Trade-marks Act of Canada, this trade-mark is subject to renewal every 15 years from the registration date.

Potential Litigation



Further to a loan by way of a secured Promissory Note made to Long Distance Billing Service, Inc. ("LDBS") of Brookneal, Virginia, which filed for Chapter 11 protection on February 22, 2005, we filed a Limited Objection and Motion to Lift the Automatic Stay, objecting to a request by LDBS that certain accounts be paid from funds held in its accounts and requesting repayment of our loan of $200,000. A hearing date of August 3, 2005 had been set for that motion. As a potential source of financing for LDBS had been identified, we agreed to postpone the hearing to September 21, 2005 to permit us to pursue a possible settlement opportunity which might have allowed us to realize a partial repayment of the debt owing to us. The possible settlement opportunity did not finalize. Subsequently, we did receive a payment from LDBS in the amount of $50,000.00 from our cash collateral as an adequate protection payment. Future payments from cash collateral may become available, but we cannot guarantee receipt of any such payments.

Liquidity and Capital Resources



We have financed our research and development activities to date with proceeds from the sale of our common stock, proceeds from issuing convertible debentures, and loans from outside sources, our directors, officers and shareholders. The following table sets forth the amount of funds we received from these sources for the periods indicated:


For the Nine Months Ended
Sources of funds September 30, 2005
------------------------- -------------------------
Contribution of Capital $ 34,386
------------------------- -------------------------
Proceeds from issuance of
common $ 395,398
------------------------- -------------------------
Proceeds from Notes
payable $ 1,293,245
------------------------- -------------------------
Proceeds from short term
loans $ 150,000
------------------------- -------------------------




Although we defaulted under certain provisions of two convertible debentures issued to Cornell Capital in May and June 2004, a Security Agreement dated May 19, 2004 between us and Cornell Capital and promissory notes, amended and restated as of June 9, 2005 and issued to Cornell Capital, Cornell Capital did not take any action to declare an event of default under those arrangements. We terminated these finance arrangements and entered into new financing arrangements to replace the Convertible Debentures, the Security Purchase Agreement, the Security Agreement, the Promissory Notes issued to Cornell, and other financing documents. The Standby Equity Distribution Agreement entered into with Cornell Capital on May 19, 2004 was terminated on the closing of this transaction on November 14, 2005. As a result of the new financing agreements with Cornell Capital, we are no longer in default under our previous financing arrangements with Cornell Capital.

Appointment of Additional Director



On August 22, 2005, we filed a form 8-K announcing that we had increased the size of our Board of Directors to six and unanimously appointed William Kunzweiler as a director of the company. Mr. Kunzweiler is 54 years of age and has been involved in land development in Whistler, British Columbia, Canada for his own account over the past five years.

Subsequent Events



We continue to lower our overall monthly expenses by the termination of non-essential employees and contractors, and the careful monitoring of capital expenditures and service vendors. In November 2005, we implemented additional cost reduction measures by reducing unnecessary office space in our Canadian offices and by having certain executive and key personnel voluntarily decrease their compensation by an average of 30%. Moreover, we have consolidated and optimized certain developmental and operational processes in order to increase operating and development results without additional costs. However, we continue to expand in areas that are essential for commercial deployment of our iWave product line. We plan to continue maintaining these measured reductions and expansions accordingly until we are generating sufficient revenue and are able to satisfactorily expand our development capacity.

On November 14, 2005, we were successful in renegotiating our financing arrangements with Cornell Capital Partners, LP and have ceased to be in default under our financing agreements with Cornell Capital. Please refer to the "Subsequent Events" section of the Notes to the Consolidated Financial Statements for an update with respect to our current financing arrangements with Cornell Capital.

RESULTS OF OPERATIONS

Three Months Ending September 30, 2005 Compared to Three Months Ending September
2004



Research and development expenses were $214,848 and $235,100 respectively during the three-month periods ending September 30, 2005 (the "2005 Period") and September 30, 2004 (the "2004 Period"). During the 2005 Period, we employed an average of 15 employees for research and development, compared to 18 employees in the 2004 Period. Wages and benefits for research and development personnel during the 2005 Period were $214,848 compared to $202,819 during the 2004 Period. The total research and development expense incurred during the 2005 Period represents approximately 22.56% of our total operating expenses for the 2005 Period. The majority of these funds were utilized for the compensation of our research and development personnel, and $446.75 of this amount was spent on equipment relating to research and development activities.

General and administrative expenses for the 2005 Period significantly decreased to $737,397 from $3,145,273 during the 2004 Period. During the 2005 Period, we employed approximately 13 employees compared to 15 in the 2004 Period. Wages and benefits for general and administrative personnel during the 2005 Period were $333,770 compared to $1,771,822 during the 2004 Period. The difference primarily results from compensation charges of $1,309,242 for stock grants issued to executive level employees. During the 2005 Period, we expensed $103,290 in consulting fees compared to $1,091,595 during the 2004 Period. In 2004, we retained the consulting services of Maximum Ventures and by virtue of their advisory agreement they received warrants to purchase our common stock. We recorded $487,022 in consulting fees for the warrants granted to Maximum Ventures. Our legal and accounting fees for the 2005 Period were $124,078 compared to $48,709 in the 2004 Period. In 2005, we incurred significant legal fees in relation to patent filings and corporate financing. As a result of corporate financing obtained, we incurred finance charges on debt and equity agreements of $14,250 compared to $0 for the 2004 Period.

Interest expense for the 2005 Period increased to $278,327 from $90,258 during the 2004 Period. We obtained additional funding to finance operations through the issuance of promissory notes with detachable warrants and convertible debentures.

As a result of the foregoing, we incurred a net loss of $1,232,208 or $0.01 per share during the 2005 Period, as compared to a net loss of $3,481,583 or $0.04 per share during the 2004 Period. We incurred a loss from operations of $952,245 during the 2005 Period, as compared to a loss from operations of $3,380,373 during the 2004 Period.

Nine Months Ending September 30, 2005 Compared to Nine Months Ending September
30, 2004



Research and development expenses were $687,761 and $818,941 respectively, during the nine-month periods ending September 30, 2005 (the "Nine-Month 2005 Period") and September 30, 2004 (the "Nine-Month 2004 Period). During the Nine-Month 2005 Period, we employed an average of 18 employees for research and development, compared to 20 employees in the Nine-Month 2004 Period. Wages and benefits for research and development personnel during the Nine-Month 2005 Period were $676,810 compared to $640,289 during the Nine-Month 2004 Period. The total research and development expense incurred during the Nine-Month 2005 Period represents approximately 13.75% of our total operating expenses for the Nine-Month 2005 Period. The majority of these funds were utilized for the compensation of our research and development personnel, and $10,950 of this amount was spent on equipment relating to research and development activities.

General and administrative expenses for the Nine-Month 2005 Period decreased to $4,315,674 from $7,723,100 during the Nine-Month 2004 Period. During the

Nine-Month 2005 Period, we employed approximately 14 employees compared to 16 employees in the Nine-Month 2004 Period. Wages and benefits for general and administrative personnel during the Nine-Month 2005 Period were $1,168,031 compared to $4,868,855 during the Nine-Month 2004 Period. The difference in general and administrative wages primarily results from compensation charges of $2,211,667 for stock grants and stock options issued to executive level employees. During the Nine-Month 2005 Period we expensed $2,103,846 in consulting fees compared to $1,674,617 during the Nine-Month 2004 Period. The difference in consulting fees primarily relates to compensation charges of $1,376,158 for certain consultants who were granted options or warrants as specified in their consulting agreements. In addition, we retained the services of several consultants who provided advisory services to the board of directors and marketing department. Our legal and accounting fees for the Nine-Month 2005 Period were $332,947 compared to $366,191 in the Nine-Month 2004 Period. During the Nine-Month 2005 Period, we incurred significant legal fees in relation to patent filings and corporate financing. As a result of corporate financing obtained in the Nine-Month 2004 Period, we incurred finance charges on debt and equity agreements of $155,000 compared to $56,750 in the Nine-Month 2005 period.

Interest expense for the Nine-Month 2005 Period increased to $1,036,532 from $210,817 during the Nine-Month 2004 Period. We obtained additional funding to finance operations through the issuance of promissory notes with detachable warrants and convertible debentures which resulted to the increase in interest expense.

We have incurred other expense for the Nine-Month 2005 Period of $205,283 as compared to other expense of $8,808 during the Nine-Month 2004 Period. We loaned Long Distance Billing Services, Inc. ("LDBS") $200,000 in the form of a promissory note during the first quarter of 2005. Subsequently, we were advised that LDBS filed for protection under Chapter 11 of the Bankruptcy Code. As a result, $200,000 provision for the impairment of the note receivable was recorded.

As a result of the foregoing, we have incurred a net loss of $6,245,250 or $0.06 per share during the Nine-Month 2005 Period, as compared to a net loss of $8,761,666 or $0.10 per share during the Nine-Month 2004 Period. We have incurred a loss from operations of $5,003,434 during the Nine-Month 2005 Period, as compared to a loss from operations of $8,542,041 during the Nine-Month 2004 Period.

We have financed our research and development activities to date with proceeds from the sale of our common stock, the issuance of convertible debentures, and loans from our officers and shareholders. The following table sets forth the amount of funds received from these sources for the periods indicated:

We have suffered recurring losses from operations and have an accumulated deficit from inception on June 18, 1999 to September 30, 2005 of $21,528,758 at September 30, 2005. Primarily as a result of our recurring losses and our lack of liquidity, we have received a report from our independent auditors that

includes an explanatory paragraph describing the uncertainty as to our ability to continue as a going concern.

Additional cash is necessary to sustain operations both in the short and long term. Additional funding is expected to be obtained as new vehicles are currently being pursued. Our ability to meet operating and capital requirements depends upon financing from external sources and ability to generate revenues from the core technologies we have developed. We cannot assure that we will obtain sufficient financing to develop profitable operations prior to utilizing all of the current resources available to us. In addition, if we do not receive the funds in a timely manner or on a scale to meet our needs, we may be forced to curtail our operations.

Although we have defaulted under several provisions of two convertible debentures issued to Cornell Capital in May and June 2004, a Security Agreement dated May 19, 2004 between us and Cornell Capital and promissory notes, amended and restated as of June 9, 2005 and issued to Cornell Capital, Cornell Capital did not take any action to declare an event of default under those arrangements. We terminated these finance arrangements and entered into new financing arrangements to replace the Convertible Debentures, the Security Purchase Agreement, the Security Agreement, the Promissory Notes issued to Cornell, and other financing documents. The Standby Equity Distribution Agreement entered into with Cornell Capital on May 19, 2004 was terminated by Cornell Capital and us on the closing of this transaction on November 14, 2005. As a result of the new financing agreements with Cornell Capital, we are no longer in default under our financing arrangements with Cornell Capital.