AntriaBio, Inc. (A Development Stage Enterprise) Financial Statements As of

(A Development Stage Enterprise)

Financial Statements

As of December 31, 2011 and 2010,

For the Year Ended December 31, 2011,

And for the Periods from March 24, 2010 (Inception) to December 31, 2010 and 2011

Report of Independent Registered Public Accounting Firm

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

We have audited the accompanying balance sheets of AntriaBio, Inc. (a development stage enterprise) as of December 31, 2011 and 2010 and the related statements of comprehensive loss, changes in stockholders' equity (deficit), and cash flows for the year ended December 31, 2011 and for the periods from March 24, 2010 (Inception) to December 31, 2010 and 2011. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of AntriaBio, Inc. as of December 31, 2011 and 2010, and the results of its comprehensive loss, changes in its stockholders' equity (deficit) and its cash flows for the year ended December 31, 2011 and for the periods from March 24, 2010 (Inception) to December 31, 2010 and 2011, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 of the accompanying financial statements, the Company is dependent on generating revenue and obtaining outside sources of financing for the continuation of their operations. These factors raise substantial doubt about the Company's ability to continue as a going concern.

SPECTRA FINANCIAL SERVICES, LLC

./s/ Spectra Financial Services, LLC

The accompanying notes are an integral part of the financial statements.

The accompanying notes are an integral part of the financial statements.

The accompanying notes are an integral part of the financial statements.

The accompanying notes are an integral part of the financial statements.

AntriaBio, Inc. ("AntriaBio" or "the Company") was organized as a Limited Liability Company (LLC) on March 24, 2010 in the state of Delaware, and is engaged in the research and development of a treatment for diabetes. On July 14, 2011, AntriaBio converted from a LLC to a Delaware C-corporation pursuant to a Certificate of Conversion.

The Company is in the process of purchasing assets to begin its planned principal operations and has not generated revenue, therefore, is classified as a development stage enterprise. Accordingly, the Company has prepared its financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") that apply to developing enterprises. As a development stage enterprise, the Company discloses its accumulated deficit during the development stage and the cumulative statements of comprehensive loss and cash flows from commencement of development stage to the current balance sheet date. The development stage began on March 24, 2010, when the Company was organized.

The preparation of financial statements in accordance with GAAP contemplates that operations will be sustained for a reasonable period. The Company is in the development stage and has incurred operating losses since inception. The Company is dependent on generating revenue or obtaining outside sources of financing for continuation of its operations. These conditions raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period.

The Company plans to improve its financial condition through raising capital and ultimately generating revenue. However, there is no assurance that the company will be successful in accomplishing this objective. Management believes that this plan provides an opportunity for the Company to continue as a going concern. We cannot give any assurances regarding the success of management's plans. Our financial statements do not include adjustments relating to the recoverability of recorded assets or liabilities that might be necessary should we be unable to continue as a going concern.

The principal accounting policies applied in the preparation of these financial statements are set out below.

Basis of Preparation - The financial statements are prepared in accordance with GAAP.

Accounting Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date the financial statements and the reported amounts of revenues and expenses during the reporting period. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 4. Actual results could differ from those estimates.

Future Accounting Policy Changes - The following accounting policies have been issued, but are not required to be adopted as of December 31, 2011.

In May 2011, the FASB issued an accounting pronouncement which amends the fair value measurement and disclosure requirements to achieve common disclosure requirements between GAAP and International Financial Reporting Standards ("IFRS"). The accounting pronouncement requires certain disclosures about transfers between Level 1 and Level 2 of the fair value hierarchy, sensitivity of fair value measurements categorized within Level 3 of the fair value hierarchy, and categorization by level of items that are reported at cost but are required to be disclosed at fair value. The disclosures are to be applied prospectively effective in the first interim and annual periods beginning after December 15, 2011. The adoption of this pronouncement is not expected to have a material impact on the Company's financial statements.

In June 2011, the FASB issued an accounting pronouncement that requires all non-owner changes in stockholders' equity to be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. Under the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income. The pronouncement should be applied retrospectively effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted. The adoption of this pronouncement is not expected to have a material impact on the Company's financial statements.

In September 2011, the Financial Accounting Standards Board ("FASB") issued an accounting pronouncement to simplify how an entity tests goodwill for impairment by permitting an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. Under previous guidance an entity was required to test goodwill for impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value was less than its carrying amount, then the second step of the test was performed to measure the amount of the impairment loss. Under the new accounting pronouncement an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. The pronouncement is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted. The adoption of this pronouncement is not expected to have a material impact on the Company's financial statements.

Segment Reporting - Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the steering committee that makes strategic decisions. The Company operates one segment as described in Note 1.

Cash and Cash Equivalents - In the statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with banks, and other short-term highly liquid investments with original maturities of three months or less.

Note Receivable - Related Party - Notes receivable represent amounts due to the company, and are recorded at cost less an allowance for note losses, if necessary.

Deferred Finance Costs - Direct, incremental finance costs related to the convertible notes payables that are recorded in liabilities are included in other current assets and amortized over the term of the respective

instrument through charges to interest expense using the effective interest method or the straight-line method, when the difference would not be material. Total deferred financing cost included in other current assets amount to $51,028, which is net of accumulated amortization of $23,972 as of December 31, 2011. There were no deferred financing costs as of December 31, 2010.

Due to Related Parties - Due to related parties represent obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers, have been paid for by a related party, and are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

Convertible Notes Payable - Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized as interest expense in the statements of comprehensive loss over the period of the borrowings using the effective interest method.

Beneficial Conversion Feature of Convertible Notes Payable - The Company accounts for convertible notes payable in accordance with the guidelines established by the Financial Accounting Standards Board's ("FASB") Accounting Standards Codification ("ASC") Topic 470-20, Debt with Conversion and Other Options, Emerging Issues Task Force ("EITF") 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios, and EITF 00-27, Application of Issue No 98-5 To Certain Convertible Instruments. The Beneficial Conversion Feature ("BCF") of a convertible note is normally characterized as the convertible portion or feature of certain notes payable that provide a rate of conversion that is below market value or in-the-money when issued. The Company records a BCF related to the issuance of a convertible note when issued and also records the estimated fair value of any warrants issued with those convertible notes. Beneficial conversion features that are contingent upon the occurrence of a future event are recorded when the contingency is resolved.

The BCF of a convertible note is measured by allocating a portion of the note's proceeds to the warrants, if applicable, and as a reduction of the carrying amount of the convertible note equal to the intrinsic value of the conversion feature, both of which are credited to additional paid-in-capital. The Company calculates the fair value of warrants issued with the convertible note using the Black Scholes valuation model and uses the same assumptions for valuing any employee options in accordance with ASC Topic 718 Compensation - Stock Compensation, which there are no employee options issued. The only difference is that the contractual life of the warrants is used.

The value of the proceeds received from a convertible note is then allocated between the conversion features and warrants on a relative fair value basis. The allocated fair value is recorded in the financial statements as a debt discount (premium) from the face amount of the note and such discount is amortized over the expected term of the convertible note (or to the conversion date of the note, if sooner) and is charged to interest expense.

Revenue - The Company recognizes revenue when it is realized or realizable and earned. We consider revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collection is reasonably assured.

The Company recognizes service-based income in the accounting period in which the services are rendered, by reference to stage of completion of the specific transaction and assessed on the basis of the actual service

provided as a proportion of the total services to be provided.

Operating Expenses - Expenses necessary to generate revenue are expensed in the period incurred.

Income Taxes - On July 14, 2011, AntriaBio converted from a limited liability company to a C-corporation. As a limited liability company for federal and state income tax purposes, AntriaBio's earnings and losses are passed directly through to its members and included in the personal tax returns of its members. Accordingly, the statements of comprehensive loss do not include any provision for income taxes for the period from March 24, 2010 (inception) through July 14, 2011.

After July 14, 2011, the Company accounts for income taxes under an asset and liability approach. This process involves calculating the temporary and permanent differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The temporary differences result in deferred tax assets and liabilities, which would be recorded on the Company's balance sheets in accordance with ASC 740, which established financial accounting and reporting standards for the effect of income taxes. The Company must assess the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent the Company believes that recovery is not likely, the Company must establish a valuation allowance. Changes in the Company's valuation allowance in a period are recorded through the income tax provision on the statements of comprehensive loss.

The Company adopted ASC 740 (formerly known as FIN No. 48, Accounting for Uncertainty in Income Taxes). ASC 740 clarifies the accounting for uncertainty in income taxes recognized in an entity's financial statements and prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Under ASC 740, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, ASC 740 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As a result of the implementation of ASC 740, the Company recognized no material adjustment in the liability for unrecognized income tax benefits.

Comprehensive Income (Loss) - Comprehensive income (loss) is defined as all changes in stockholders' equity from transactions and other events and circumstances. Therefore, comprehensive income (loss) includes our net loss and all charges and credits made directly to stockholders' equity other than stockholder contributions and distributions. As of December 31, 2011 and 2010, the Company has no items other than net loss affecting comprehensive loss.

Income (Loss) Per Common Share - Basic income (loss) per common share is calculated by dividing the net income (loss) available to the common shareholders by the weighted average number of common shares outstanding during that period. Diluted earnings per share is calculated on the treasury stock method, by dividing income available to common shareholders, adjusted for the effects of dilutive convertible securities, by the weighted average number of common shares outstanding during the period and all additional common shares that would have been outstanding had all potential dilutive common share been issued. This method computes the number of additional shares by assuming all dilutive options are exercised. The total number of shares is then reduced by the number of common shares assumed to be repurchased from the total of issuance proceeds, using the average market price of the Company's common shares for the period. There were no

dilutive securities during the periods presented in the accompanying financial statements other than those associated with the Company's convertible notes payable.

Fair Value of Financial Instruments - From inception, the Company adopted FASB ASC 820, Fair Value Measurements and Disclosures, which provides a framework for measuring fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The standard also expands disclosures about instruments measured at fair value and establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

The carrying amounts of financial instruments including cash and cash equivalents, notes receivable, due to related parties, and notes payable approximated fair value as of December 31, 2011 and 2010 due to the relatively short maturity of the respective instruments.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year include:

Note Receivable - Related Party: The Company is required to exercise judgement in determining to collectability of its note receivable from a related party, including a determination of the counterparty's ability to repay its obligation to the Company. This assessment includes management's judgement about the ability of the debtor to generate additional sources of financing, revenue, and ultimately adequate cash flows to service the note receivable.

Contingent Liabilities: The Company is required to make judgments about contingent liabilities including the probability of pending and potential future litigation outcomes that, by their nature, are dependent on future events that are inherently uncertain. In making its determination of possible scenarios, management considers the evaluation of outside counsel knowledgeable about each matter, as well as known outcomes in case law.

Income Taxes: Significant judgement is involved in determining the Company's provision for income taxes, including any valuation allowance on deferred income tax assets. There are certain transactions and computations for which the ultimate tax determination is uncertain during the normal course of business. The

Company recognizes liabilities for expected tax issues based upon estimates of whether additional taxes will be due. Where the final outcome of these matters is different from the amounts that were initially recognized, such difference will impact the income tax and deferred tax positions in the year in which such determination is made.

The Company has a system of controls in place to create an acceptable balance between the cost of risks occurring and the cost of managing the risk. Management continually monitors the Company's risk management process to ensure that an appropriate balance between risk and control is achieved. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company's activities. The Company reviews and agrees policies and procedures for the management of these risks.

The Company is exposed to financial risks arising from its operations and the use of financial instruments. The key financial risks include market risk, credit risk, and liquidity risk. The following section provides details regarding the Company's exposure to these risks and the objectives, policies and processes for the management of these risks.

Market Risk - Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will affect the Company's income or the value of its holdings of financial instruments. The Company is exposed to market risk in terms of interest rates that could impact the fair value and interest associated with its notes receivable and notes payable, and the fair value of any derivatives. Furthermore, the potential for changes in the value of the Company's stock expose the company to market risk associated with its convertible notes payable and the valuation of any associated derivatives.

Credit Risk - Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. Credit risk arising from the inability of a customer or other debtor to meet the terms of the Company's financial instrument contracts is generally limited to the amounts, if any, by which the customer's obligations exceed the obligations of the Company. The Company's exposure to credit risk arises primarily from its cash and cash equivalents and its related party note receivable for which the Company minimises credit risk by dealing with reputable counterparties with high credit ratings and no history of default.

Liquidity Risk - Liquidity risk is the risk that the Company will encounter difficulty in meeting financial obligations due to shortage of funds. The Company's exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Company's liquidity risk management policy is to monitor its net operating cash flows and maintain an adequate level of cash and cash equivalents through regular review of its working capital requirements. The Company monitors and maintains a level of cash considered adequate by management to finance the Company's operations and mitigate the effects of the fluctuations in cash flows.

On September 1, 2011, the AntriaBio, Inc. board of directors approved the issuance of a $1,000,000 line of credit to Drywave Technologies, Inc. EU One Group, LLC, our majority stockholder, is the majority holder of Drywave Technologies, Inc. and Mr. Howe, our Executive Chairman, currently serves currently serves as Chairman, Chief Executive Officer and a member on the board of directors of Drywave Technologies, Inc. The line of credit was issued in order for the Company to obtain a higher interest rate on excess cash and to assist the related parties with cash flow needs.

Effective September 1, 2011, the Company issued a $1,000,000 line of credit to Drywave Technologies, Inc. a related party. The balance due on the line of credit and accrued interest receivable as of December 31, 2011 was $407,004 and $7,111. At December 31, 2011, the unused balance under the line of credit amounted $592,996. The line of credit bears interest equal to the lower of 10%, or the Wall Street Journal Prime Rate which is 3.25% at December 31, 2011) plus 5%. On December 31, 2011, the interest rate was 8.25%. This line of credit is for a period of one year and matured on August 31, 2012 and was not renewed. The line of credit is secured by one million shares of the Drywave Technologies, Inc. common stock. On February 4, 2013 this line of credit had a balance of $1,038,726. On February 5, 2013, $700,000 of the outstanding balance of $1,038,726 was paid with a commitment from the related party to pay the remaining balance of $338,726. As of December 31, 2011, there was no allowance for note loss recorded on the receivable.

During the period from March 24, 2010 (Inception) to December 31, 2010, the Company incurred consulting expenses of $111,000 and professional expenses of $18,000 for services performed by related parties of the Company and included in the statements of comprehensive loss. As of December 31, 2010, $71,950 of related party expenses are recorded in accrued expenses.

During the year ended December 31, 2011, the Company incurred consulting expenses of $155,000 for services performed by related parties of the Company and included in the statements of comprehensive loss. As of December 31, 2011, $145,200 of related party expenses are recorded in accrued expenses. The Company also incurred $75,000 of financing fees with a related party which are recorded as deferred financing costs in other current assets on the accompanying balance sheet and are amortized over the life of the associated debt.

As of December 31, 2011 and 2010, the due to related party was $2,140 and $5,634, respectively.

2010 Notes (See (A) below.) - During 2010 and 2011, the Company issued 8% convertible notes payable for which principal and interest is due two years after date of issuance. Pursuant to the terms of the 2010 Notes, the Company will enter a binding term sheet, to merge into a public company ("Pubco") via a reverse triangular merger. Pubco will conduct a private placement offering pursuant to Regulation D and/or Regulation S of the Securities Act and any and all applicable state securities laws (the "PPO") for a minimum of $2,500,000 (the "Minimum PPO") through the sale of 2,500,000 Units (as defined below) of Pubco's securities and a maximum of $5,000,000 (the "Maximum PPO") through the sale of 5,000,000 Units, at an offering price of the market price per Unit. Each Unit is comprised of one (1) share of common stock and one half (1/2) of a common stock purchase warrant ("Investor Warrants"). Each whole Investor Warrant will entitle the holder thereof to purchase one share of Pubco Common Stock, at an exercise price of $2.00 per share and will be exercisable for a period of five (5) years from the Closing Date.

Upon the close of a Financing, as defined, means any third party capital investment in the Company, in cash, that is two million, five hundred thousand dollars ($2,500,000) or greater, the outstanding principal balance and at the option of the Lender, the unpaid accrued interest on these convertible notes shall convert in whole into the number of whole shares of common stock obtained by dividing the outstanding principal balance and unpaid accrued interest on these convertible notes at the time of such Financing, by the Conversion Price. The "Conversion Price" under these notes shall initially be 65% of the common share price of the Financing, subject to adjustment as provided herein. If the Company elects to pay the accrued interest on these convertible notes in cash, the accrued interest payment shall be due on the date the principal amount is converted to common stock.

The convertible notes outstanding as of December 31, 2010 include:

The 2010 Notes originated at various dates from April 2010 to October 2010 and mature at various dates from April 2012 through October 2012.

2011 Notes (See (B) below.) - During June 2011, the Company issued 8% convertible notes payable via Private Placement Memorandum ("PPM"). The PPM authorizes the issuance of up to $2,000,000 of convertible notes payable for which principal and interest is due one year after date of issuance. Pursuant to the terms of the PPM, upon an offering by the Company of common stock totalling at least $5 million (a "Qualified Offering") the notes will automatically and on a mandatory basis convert (the "Mandatory Conversion") into common shares of the Company and the right to receive warrants. On the date of closing of a Qualified Financing of common shares, the Notes will convert into common shares of the Company at a price equal to 65% of the price per common share of the Qualified Financing (the "Mandatory Conversion Price"), subject to a maximum conversion pre-money valuation of $20 million, and the right to receive Warrants. The conversion will include the face amount of the Notes and include any accrued and unpaid interest. For each common share received as a result of the Mandatory Conversion, the Investor will receive one (1) warrant to purchase one (1) common share of the Company at an exercise price equal to 135% of the price per common share at which the Notes are converted pursuant to the Mandatory Conversion. The warrants will be exercisable at any time for a period of five years from the date of the Qualified Offering.

2011 Notes (See (C) below) - In September 2011, the Company amended its 2011 PPM (above) to remove the mandatory conversion feature and to permit conversion of the notes payable at the option of the lender. The remaining terms remain essentially the same as the 2011 Notes described above. See Note 12 for additional sales of these notes and other changes to the terms subsequent to December 31, 2011.

The convertible notes outstanding as of December 31, 2011 include:

The convertible notes originated at various dates from April 2010 to October 2011 and mature at various dates from April 2012 through February 2013.

The maturity of the convertible notes payable are as follows for the years ending December 31:

Common Stock - The Company is authorized to issue 90,000,000 shares of $0.01 par-value common stock. All shares of the Company's common stock have equal rights and privileges with respect to voting, liquidation and dividend rights. Each share of common stock entitles the holder thereof to:

Stockholders have no pre-emptive rights to acquire additional shares of common stock or any other securities. Common shares are not subject to redemption and carry no subscription or conversion rights.

On July 5, 2011, the Company granted 35,284 founders shares of common stock at par value $0.01, with the conversion to a C-corporation. The Company has a stock subscription receivable for $353 as of December 31, 2011, which is included in stockholders equity.

On September 30, 2011 the Company approved a stock split of 1000 for 1 resulting in 35,284,000 shares outstanding at December 31, 2011. With the stock split the par value of the common shares changed to $0.00001 per share.

Preferred Stock - The Company is authorized to issue 10,000,000 shares of Preferred Stock with each share having a par value of $0.01. No preferred shares are designated and there are no preferred shares issued and outstanding as of December 31, 2011 or 2010.

Deficit accumulated during the development stage - Deficit accumulated during the development stage represents the Company's accumulated net loss at December 31, 2011 and 2010. The Company has not declared or paid any dividends or returned any capital to shareholders as of December 31, 2011.

Taxing jurisdictions related to income taxes are the Unitrd States Federal Government and the State of Colorado. The provision for income taxes is as follows:

Deferred taxes are a result of differences between income tax accounting and GAAP with respect to income and expenses. The following is a summary of the components of deferred taxes recognized in the financial statements as of December 31, 2011:

The valuation allowance was established because the Company had not reported earnings in order to support the recognition of the deferred tax asset. The Company has net operating loss carryforwards of approximately $164,000 for federal and state income tax purposes. Federal and state net operating loss carryforwards, to the extent not used, will expire starting in 2031.

The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate of 34% to pretax income from the period from July 14, 2011 to December 31, 2011, due to the following:

Consulting Agreements - The Company entered into a consulting agreement with a the Executive Chairman. During 2012, the Executive Chairman released the Company from its obligation any outstanding consulting obligations due or any continuing obligations from the agreement.

Employment Agreements - The Company enters into employment agreements with the officers of the Company. These agreements typically include bonuses, some of which are performance-based in nature. Subsequent to December 31, 2011, the Company entered into three employment agreements whereby the Company is obligated to pay an annual performance bonus ranging from 30% to 40% of the employee's base salary based upon the achievement of pre-established milestones and one of the agreements provides for a one-time bonus upon closing a qualified financing. See Note 12.

Legal Matters - From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business. As of December 31, 2011, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholders, is an adverse party or has a material interest adverse to our interest.

Indemnification of Underwriters and Initial Purchasers of Securities - In connection with the sale of equity and convertible debt securities, the Company has agreed to defend, indemnify and hold harmless the underwriters or initial purchasers, as applicable, as well as certain related parties from and against certain liabilities, including liabilities under the Securities Act of 1933, as amended. The term of these indemnification obligations is generally perpetual. There is no limitation on the potential amount of future payments that could be required to be made under these indemnification obligations. No costs have been incurred to defend lawsuits or settle claims related to these indemnification obligations. If any indemnification obligations are triggered, however, substantial liabilities may be incurred. Because the obligated amount of this agreement is not explicitly stated, the overall maximum amount of the obligations cannot be reasonably estimated. Historically, no significant payments for these obligations have been made, and no liabilities have been recorded for these obligations in the balance sheets as of December 31, 2011 or 2010.