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ICEWEB INC S-1 Filing

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ICEWEB INC S-1 Filing Powered By Docstoc
					As filed with the Securities and Exchange Commission on August 21, 2012

                                                                                                                 Registration No. 333-__________

                                                           UNITED STATES
                                               SECURITIES AND EXCHANGE COMMISSION
                                                        Washington, D.C. 20549



                                                      FORM S-1
                                REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

                                                                 ICEWEB, INC.
                                                (Exact name of registrant as specified in its charter)

                                                                      Delaware
                                                            (State or other jurisdiction of
                                                           incorporation or organization)

                                                                        3572

                                                 (Primary Standard Industrial Classification Code
                                                                    Number)

                                                                   13-2640971
                                                        (I.R.S. Employer Identification No.)

                                                           22900 Shaw Road, Suite 111
                                                               Sterling, VA 20166
                                                                 (571) 287-2388
                                          (Address, including zip code, and telephone number, including
                                              area code, of registrant’s principal executive offices)

                                                              Mark B. Lucky, CFO
                                                                  IceWEB, Inc.
                                                          22900 Shaw Road, Suite 111
                                                               Sterling, VA 20166
                                                                 (571) 287-2388
                                            (Name, address, including zip code, and telephone number,
                                                    including area code, of agent for service,)

                                     Approximate date of commencement of proposed sale to the public:
                                    As soon as practicable after this Registration Statement becomes effective.




If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933 check the following box: 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering. 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering. 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company:
Large accelerated filer                                                         Accelerated filer                               
Non-accelerated filer                                                           Smaller reporting company                       




                                                          CALCULATION OF REGISTRATION FEE
                                                                             Proposed Maximum             Proposed Maximum               Amount of
                                                            Amount to be      Offering Price Per          Aggregate Offering             Registration
Title of Each Class of Securities to be Registered           Registered             Shares                       Price                     Fee (3)
Common stock, $0.001 par value per share, (1)                   13,455,958   $             0.0575     $                773,718       $                  89

Common stock, par value $0.001 per share, issuable upon
exercise of warrants issued to investors (2)                    25,802,312   $               0.15     $              3,870,347       $                  444

Total                                                           39,258,270                            $              4,644,065       $                  553

1
         Represents shares of common stock which are presently outstanding.
2
         Represents shares of common stock issuable upon the exercise of common stock purchase warrants with an exercise price of $0.15 per
share.
3
      Estimated solely for purposes of calculating the registration fee pursuant to Rule 457 under the Securities Act of 1933 based on the
average of the high and low sale price of the common stock as reported on the OTC Bulletin Board on August 17, 2012.

To the extent permitted by Rule 416, this registration statement also covers such additional number of shares of common stock as may be
issuable as a result of the anti-dilution provisions of the warrants in the event of stock splits, stock dividends or similar transactions.

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. The selling security holders may not sell these securities
until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to
sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

                     PRELIMINARY PROSPECTUS                  SUBJECT TO COMPLETION, DATED AUGUST 21, 2012

                                                                39,258,270 Shares

                                                                   IceWEB, Inc.

                                                                  Common Stock

         This prospectus relates to the sale by the selling security holders identified in this prospectus of up to 39,258,270 shares of our
common stock, which includes 13,455,958 shares which are presently outstanding and 25,802,312 shares issuable upon the exercise of warrants
with an exercise price of $0.15 per share. All of these shares of our common stock are being offered for resale by the selling security holders.

         The prices at which the selling security holders may sell shares will be determined by the prevailing market price for the shares or in
negotiated transactions. We will not receive any proceeds from the sale of these shares by the selling security holders. However, we will
receive proceeds from the exercise of the warrants if they are exercised for cash by the selling security holders.

        We will bear all costs relating to the registration of these shares of our common stock, other than any selling security holders’ legal or
accounting costs or commissions.

         Our common stock is quoted on the regulated quotation service of the OTC Bulletin Board under the symbol “IWEB”. The last
reported sale price of our common stock as reported by the OTC Bulletin Board on August 17, 2012, was $0.07 per share.

         For a description of the plan of distribution of these shares, please see page 15 of this prospectus.

       Investing in our common stock is highly speculative and involves a high degree of risk. You should carefully consider the risks
and uncertainties described under the heading “Risk Factors” beginning on page 3 of this prospectus before making a decision to
purchase our common stock.

         Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these
securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

                                                    The date of this prospectus is [     ], 2012
                                                       ABOUT THIS PROSPECTUS

         You should rely only on the information contained in this prospectus, any supplement and the documents we have incorporated by
reference. We have not authorized anyone to provide information that is different from that contained in this prospectus. The information
contained in this prospectus, any supplement and any document incorporated by reference is accurate only as of the date of such document,
regardless of the time of delivery of this prospectus or of any sale of our common stock.

                                                        PROSPECTUS SUMMARY

       This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information that
you should consider in making your investment decision. You should read the following summary together with the entire prospectus, including
the more detailed information regarding us, the common stock being sold in this offering and our financial statements and the related notes
appearing elsewhere in this prospectus. You should carefully consider, among other things, the matters discussed in the sections entitled “Risk
Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this prospectus before deciding
to invest in our common stock. Some of the statements in this prospectus constitute forward-looking statements. See “Special Note Regarding
Forward-Looking Statements.”

      Except where the context otherwise requires or where otherwise indicated, the terms “IceWEB,” “we,” “us,” “our,” “our company”
and “our business” refer IceWEB, Inc. and its consolidated subsidiaries as a combined entity. Certain differences in the numbers in the tables
and text throughout this prospectus may exist due to rounding.

      The fiscal year ends on September 30. References to fiscal 2011, for example, refer to the fiscal year ending September 30, 2011.

      The information which appears on our web site at www.iceweb.com is not part of this prospectus.

About Us

         Headquartered just outside of Washington, D.C., we manufacture and market unified data storage, purpose built appliances, network
and cloud attached storage solutions and deliver on-line cloud computing application services. Our customer base includes U.S. government
agencies, enterprise companies, and small to medium sized businesses (SMB).

          Our principal executive offices are located at 22900 Shaw Road, Suite 111, Sterling, VA 20166 and our telephone number at that
office is (571) 287-2400. Our fiscal year end is September 30.


                                SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

         This prospectus contains forward-looking statements. Such statements include statements regarding our expectations, hopes, beliefs or
intentions regarding the future, including but not limited to statements regarding our market, strategy, competition, development plans
(including acquisitions and expansion), financing, revenues, operations, and compliance with applicable laws. Forward-looking statements
involve certain risks and uncertainties, and actual results may differ materially from those discussed in any such statement. Factors that could
cause actual results to differ materially from such forward-looking statements include the risks described in greater detail in the following
paragraphs. All forward-looking statements in this document are made as of the date hereof, based on information available to us as of the date
hereof, and we assume no obligation to update any forward- looking statement. Market data used throughout this prospectus is based on
published third party reports or the good faith estimates of management, which estimates are based upon their review of internal surveys,
independent industry publications and other publicly available information. Although we believe that such sources are reliable, we do not
guarantee the accuracy or completeness of this information, and we have not independently verified such information.


                                                                       2
                                            SELECTED CONSOLIDATED FINANCIAL DATA

         The following summary of our financial information for the three and nine months ended June 30, 2012 (unaudited) and 2011
(unaudited) and the fiscal years ended September 30, 2011 and 2010, which have been derived from, and should be read in conjunction with,
our consolidated financial statements included elsewhere in this prospectus.

SELECTED INCOME STATEMENT DATA:

                                                                      Three months ended June 30,             Nine months ended June 30,
                                                                         2012             2011                   2012            2011
Net Revenues                                                         $      654,996 $       719,727         $    2,546,852 $      2,514,164
Total operating expenses                                                  1,070,532         932,559              2,830,954        3,482,289
Loss from operation                                                        (859,551 )      (593,616 )           (1,953,806 )     (2,285,424 )
Total other expense                                                      (3,140,324 )      (104,653 )           (4,569,124 )       (302,908 )
Net loss                                                             $ (3,999,875 ) $      (698,269 )       $ (6,522,930 ) $ (2,588,332 )

SELECTED BALANCE SHEET DATA:

                                                                                                              June 30,         September 30,
                                                                                                                2012               2011
Working Capital                                                                                                (5,462,640 )        (1,713,333 )
Cash                                                                                                               774,012              4,120
Total current assets                                                                                             2,437,404          2,450,806
Total assets                                                                                                     3,078,092          2,832,158

Total current liabilities                                                                                        7,900,044           4,164,139
Total liabilities                                                                                                7,900,044           4,164,139

THE OFFERING

         This prospectus covers the resale of a total of 39,258,270 shares of our common stock by the selling security holders which includes
13,455,958 shares that are presently outstanding and 25,802,312 shares that are issuable upon the exercise of warrants with an exercise price of
$0.15 per share. Selling security holders may resell their shares from time-to-time, including through broker-dealers, at prevailing market
prices. We will not receive any proceeds from the resale of our shares by the selling security holders. To the extent the warrants are exercised
on a cash basis, we will receive the exercise price of the warrants. We will pay all of the fees and expenses associated with registration of the
shares covered by this prospectus.


                                                                        3
Securities Being Offered:                             39,258,270           shares of common stock, par value $0.001

Number of Shares Outstanding

Before the Offering:                                  187,071,442          shares as of June 30, 2012, excluding the conversion of 108,923,626
                                                                           outstanding warrants, 626,667 shares of Series B convertible preferred
                                                                           stock held by the estate of former IceWEB CEO and Chairman John R.
                                                                           Signorello, which are convertible into 626,667 shares of Common
                                                                           Stock, $818,332 of convertible notes outstanding as of June 30, 2012
                                                                           which at the current market price is convertible into 11,058,534
                                                                           common shares, and options exercisable into 2,269,417 shares of
                                                                           common stock.

Number of Shares Outstanding After
the Offering, Assuming the Exercise of All of the     295,995,068          shares as of June 30, 2012, 626,667 shares of Series B convertible
Warrants:                                                                  preferred stock held by the estate of former IceWEB CEO and
                                                                           Chairman John R. Signorello, which are convertible into 626,667
                                                                           shares of common stock, $818,332 of convertible notes outstanding as
                                                                           of June 30, 2012 which at the current market price is convertible into
                                                                           11,058,534 common shares, and options exercisable into 2,269,417
                                                                           shares of common stock.

OTC Bulletin Board symbol                             IWEB

                                TERMS OF THE OFFERING WITH THE SELLING SECURITY HOLDERS

         This prospectus covers the resale of shares of our common stock underlying warrants issued by us in a private placement in September
2011 as well as shares of our common stock underlying units issued by us in a private placement in June 2012 and July 2012. Information on
these offerings is set forth below. Selling security holders may resell their shares from time-to-time, including through broker-dealers, at
prevailing market prices. We will not receive any proceeds from the resale of our shares by the selling security holders. To the extent the
warrants are exercised on a cash basis, we will receive the exercise price of the warrants. We will pay all of the fees and expenses associated
with registration of the shares covered by this prospectus.

2011 private offering

         In September 2011 we sold 9,762,667 units of our securities to accredited investors in a private placement exempt from registration
under the Securities Act of 1933 in reliance on exemptions provided by Section 4(2) of that act and Regulation D. Each unit consisted of one
share of our common stock and a warrant to purchase one share of common stock at an exercise price of $0.15 per share. The terms of the
warrants are described later in this prospectus under Description of Securities. We received gross proceeds of $1,171,520.

Anderson and Strudwick, Inc., a broker-dealer and member of FINRA, acted as the non-exclusive placement agent for us in the
offering. Under the terms of a placement agent agreement with the firm, we paid Anderson and Strudwick, Inc. a cash commission of
$128,867 and issued the firm five-year common stock purchase warrants to purchase an aggregate of 976,267 shares of our common stock at an
exercise price of $0.15 per share. In addition, we paid Anderson and Strudwick, Inc. legal expenses totaling $5,000 incurred in the preparation
of the various transactional documents. We are using the net proceeds of this offering for general working capital.

Under the terms of the securities purchase agreement we also indemnified the purchasers and each of their officers, directors, shareholders,
partners, employees, agents and control persons from any losses or damages as a result of a breach of the agreement by us or any action
instituted against a purchaser by any of our security holders who are not an affiliate of the purchasers with respect to this offering, other than in
the instance of gross negligence or fraud by the purchaser.

            This prospectus covers the resale of 9,762,667 shares underlying the warrants and 976,267 shares underlying the issued in this
offering.


                                                                          4
2012 private offering

          In June 2012 and July 2012 we sold 13,455,958 units of our securities to accredited investors in a private placement exempt from
registration under the Securities Act of 1933 in reliance on exemptions provided by Section 4(2) of that act and Regulation D. Each unit
consisted of one share of our common stock and a warrant to purchase one share of our common stock with an exercise price of $0.15/share.
The terms of the warrants are described later in this prospectus under Description of Securities. We received gross proceeds of $1,614,715.

          Meyers Associates, L.P., a broker-dealer and member of FINRA, acted as the non-exclusive placement agent for us in the
offering. Under the terms of a placement agent agreement with the firm, we paid Meyers Associates, L.P. a cash commission of $161,472 and
issued the firm five-year common stock purchase warrants to purchase an aggregate of 1,345,596 shares of our common stock at an exercise
price of $0.15 per share. In addition, we paid Meyers Associates, L.P. legal expenses totaling $13,325 incurred in the preparation of the
various transactional documents. We are using the net proceeds of this offering for general working capital.

          Under the terms of the Securities Purchase Agreement we also indemnified the purchasers and each of their officers, directors,
shareholders, partners, employees, agents and control persons from any losses or damages as a result of a breach of the agreement by us or any
action instituted against a purchaser by any of our shareholders who are not an affiliate of the purchasers with respect to this offering, other
than in the instance of gross negligence or fraud by the purchaser.

          We entered to a Registration Rights Agreement with the investors in this offering that requires we file a registration statement with the
SEC within 45 calendar days from the closing date of the offering to register for resale of 133% of the maximum number of shares of our
common stock sold in the offering, including underlying the warrants and the placement agent warrants. This prospectus is part of that
registration statement. The initial registration statement must be declared effective by the SEC within 90 calendar days from the closing date, or
120 calendar days if the registration statement is reviewed by the SEC. We will be required to pay liquidated damages to the investors if:

                    the initial registration statement is not timely filed with the SEC, or
                    it is not declared effective by the SEC the effectiveness deadline, or
                    other than during an allowable grace period, on any day after the effective date of a registration statement sales of all of the
                     registrable securities required to be included on such registration statement cannot be made pursuant to such registration
                     statement, or
                    if a registration statement is not effective for any reason or the prospectus contained therein is not available for use for any
                     reason, or we are not in compliance with the current public information requirement of Rule 144(c) of the Securities Act of
                     1933, as a result of which any of the investors are unable to sell registrable securities without restriction under Rule 144.

        Upon the occurrence of any of these events we are obligated to pay each investor an amount in cash equal to 1% of such investor’s
purchase price in the offering on each of these dates and on every 30 day anniversary of each the date until these filing failures are cured. In the
event we fail to make the payments in a timely manner in accordance with the foregoing, the payments shall bear interest at the rate of 1.5% per
month, prorated for partial months, until paid in full.

         We agreed to keep the registration statement effective until all registrable securities have been disposed of. We also agreed to pay all
costs associated with the preparation and filing of this registration statement. The Registration Rights Agreement contains customary
indemnification provisions for all parties.

            This prospectus covers the resale of 13,455,958 shares underlying the warrants and 1,345,596 shares underlying the issued in this
offering.

                                                                  RISK FACTORS

     AN INVESTMENT IN OUR COMMON STOCK INVOLVES A SIGNIFICANT DEGREE OF RISK. YOU SHOULD NOT INVEST
IN OUR COMMON STOCK UNLESS YOU CAN AFFORD TO LOSE YOUR ENTIRE INVESTMENT. YOU SHOULD CONSIDER
CAREFULLY THE FOLLOWING RISK FACTORS AND OTHER INFORMATION IN THIS PROSPECTUS BEFORE DECIDING TO
INVEST IN OUR COMMON STOCK.


                                                                           5
                                                  RISKS RELATED TO OUR COMPANY

WE HAVE AN ACCUMULATED DEFICIT AND MAY HAVE CONTINUING LOSSES THAT WOULD RESULT IN SIGNIFICANT
LIQUIDITY AND CASH FLOW PROBLEMS ABSENT MATERIAL INCREASES IN REVENUES.

          We had an accumulated deficit of approximately $40.9 million at June 30, 2012. For the years ended September 30, 2011 and 2010,
we had a net loss of approximately $4.71 million and approximately $6.96 million, respectively. For the fiscal nine months ended June 30,
2012, we had a net loss attributable to common security holders of approximately $6.5 million. In fiscal year 2011, cash used in operations was
approximately $2.29 million. The report of our independent registered public accounting firm on our consolidated financial statements for the
fiscal year ended September 30, 2011 contains a qualification expressing substantial doubt as to our ability to continue as a going concern as a
result of net losses and cash used in operations. We cannot assure prospective investors that sales will increase in future periods, nor can we
assure prospective investors that they will not further decrease. We expect to potentially make significant expenditures related to the
development of the business, potentially including hiring additional personnel relating to sales and marketing, customer service and support and
technology development. As a result of these increased expenditures, we will be required to generate and sustain increased revenue to achieve
profitability. As long as cash flow from operations remains insufficient to fund operations, we will continue depleting cash and other financial
resources. Our failure to achieve profitable operations in future periods will adversely affect its ability to continue as a going concern. In this
event, prospective investors could lose all of their investment in our company.

WE MAY NEED ADDITIONAL FINANCING WHICH IT MAY NOT BE ABLE TO OBTAIN ON ACCEPTABLE TERMS, IF AT ALL. IF
WE CANNOT RAISE ADDITIONAL CAPITAL AS NEEDED, OUR ABILITY TO EXECUTE OUR GROWTH STRATEGY AND TO
FUND OUR ONGOING OPERATIONS MAY BE IN JEOPARDY.

          Historically, our operations have been financed primarily through the issuance of equity and short-term loans. Capital is typically
needed not only to fund ongoing operations and to pay existing obligations, but capital is also necessary if we wish to acquire additional assets
or companies and for the effective integration, operation and expansion of these businesses. Future capital requirements, however, depend on a
number of factors, including the ability to internally grow revenues, manage the business and control expenses. At September 30, 2011, we had
a working capital deficit of $1,713,336 as compared to a working capital deficit of $1,250,033 at September 30, 2010. As of June 30, 2012, we
had a working capital deficit of $5,462,640. We may need to raise additional capital to fund ongoing operations, pay existing obligations and
fund future growth. There are no assurances that additional working capital will be available in the future upon terms acceptable to us. If we do
not raise funds as needed, our ability to provide for current working capital needs, make additional acquisitions, grow the company, and
continue our existing business and operations may be in jeopardy. In this event, prospective investors could lose all of their investment in our
company.


                                                                        6
THE LOSS OF KEY SENIOR MANAGEMENT PERSONNEL, INCLUDING THE RECENT DEATH OF OUR CHAIRMAN AND CHIEF
EXECUTIVE OFFICER, COULD NEGATIVELY AFFECT OUR BUSINESS.

          In May 2012, our Chairman and Chief Executive Officer, John R. Signorello, passed away. Hal Compton, Sr., a member of the board
of directors, is now serving as interim Chief Executive Officer, and Mark Lucky, our Chief Financial Officer, is now serving as interim Chief
Operating Officer. Without Mr. Signorello’s participation in our company’s business and operations, we could experience negative impacts to
our business, future operating profits and results of operations. In addition, we depend upon our senior management and other key personnel,
including Messrs. Compton and Lucky. The loss of these individuals or any of our other current or future executive officers or key employees
could harm our business, future operating prospects and results of operations. Additionally, we do not currently maintain “key person” life
insurance policies on the lives of any of our executive officers. This lack of insurance means that we may not receive adequate compensation
for the loss of the services of these individuals.

WE RELY ON VALUE-ADDED RESELLERS AND OTHER DISTRIBUTION PARTNERS TO SELL SUBSTANTIALLY ALL OF OUR
PRODUCTS. FAILURE TO DEVELOP AND MANAGE, OR DISRUPTIONS TO, OUR DISTRIBUTION CHANNELS WOULD
ADVERSELY AFFECT ITS BUSINESS.

          Our ability to maintain or increase revenue will depend in part on our ability to maintain arrangements with existing resellers and
other distribution partners, which we refer to as “channel partners,” and to establish and expand arrangements with new channel partners. If we
fail to do so, future revenue could be harmed. Additionally, by relying on channel partners, we have less contact with the ultimate users of our
products, which may make it difficult for us to establish and increase brand awareness, ensure proper delivery and installation of our products,
service ongoing customer requirements and respond to evolving customer needs.

           Recruiting and retaining qualified channel partners and training them in our technology and product offerings requires significant time
and resources. In order to develop and expand distribution channels, we must continue to scale and improve the processes and procedures that
support these channels, including investment in systems and training. Those processes and procedures may become increasingly complex and
difficult to manage as we expand our organization.

          We have no minimum purchase commitments from any channel partners, and contracts with these channel partners do not prohibit
them from offering products or services that compete with ours. Competitors may provide incentives to existing and potential channel partners
to favor their products. Channel partners may choose not to offer our products exclusively or at all. Establishing relationships with channel
partners who have a history of selling competitors’ products may also prove to be difficult. Failure to establish and maintain successful
relationships with channel partners would seriously harm our business and operating results.

WE RECEIVE A SUBSTANTIAL PORTION OF REVENUE FROM A LIMITED NUMBER OF CHANNEL PARTNERS, AND THE LOSS
OF, OR A SIGNIFICANT REDUCTION IN, ORDERS FROM ONE OR MORE OF ITS MAJOR CHANNEL PARTNERS WOULD HARM
ITS BUSINESS.

          Our future success is highly dependent upon establishing and successfully maintaining relationships with a large number of channel
partners. We market and sell our IceWEB Unified Data Storage products through an all-channel assisted sales model and we derive
substantially all of our revenue from these channel partners. We receive a substantial portion of revenue from a limited number of channel
partners. We anticipate that we will continue to receive a significant portion of revenue from a limited number of channel partners for the
foreseeable future and, in some cases, a portion of revenue attributable to individual channel partners may increase in the future. The loss of
one or more key channel partners or a reduction in sales through any major channel partner could harm our business.


                                                                        7
IF WE ARE UNABLE TO CONTINUE TO DEVELOP AND INTRODUCE NEW PRODUCTS AND RESPOND TO TECHNOLOGICAL
CHANGES, REVENUE COULD BE REDUCED.

         Future growth depends on the successful development and introduction of new systems and software products. Due to the complexity
of network storage systems, these products are subject to significant technical risks that may impact our ability to introduce these products
successfully. Our new products also may not achieve market acceptance. In addition, new products must respond to technological changes and
evolving industry standards. If we are unable for technological or other reasons to develop and introduce new products in a timely manner in
response to changing market conditions or customer requirements, or if these products do not achieve market acceptance, revenue could be
reduced.

IMPROVEMENTS IN ALTERNATIVE MEANS TO ACCELERATE STORAGE PERFORMANCE OR REDUCE STORAGE COSTS
COULD HARM OUR BUSINESS AS THE DEMAND FOR ITS SYSTEMS MAY BE REDUCED.

         Our products are designed to improve the performance of many applications, including applications that are based on Microsoft
Corporation’s protocols. Accordingly, changes to Microsoft application protocols such as to accelerate storage performance or reduce storage
costs may reduce the need for our products, adversely affecting our business, operating results and financial condition. Changes in other
application protocols or in the Transmission Control Protocol, the set of rules used to send data in the form of message units between
computers over the Internet, could have a similar effect.

IF WE ARE UNABLE TO CONTINUE TO CREATE ATTRACTIVE INNOVATIONS IN SOFTWARE AND HARDWARE, WE MAY
NOT BE ABLE TO GENERATE HIGH-MARGIN REVENUE THAT WILL ENABLE US TO MAINTAIN OR INCREASE GROSS
PROFITS, WHICH COULD ADVERSELY AFFECT OUR BUSINESS.

         Our industry has a history of declining network storage hardware prices as measured on a “dollar per gigabyte of storage capacity”
basis. To maintain or increase gross profits, we will need to continue to create attractive software that is included with network storage systems
and/or sold separately as licensed software applications. Any new feature or application that we develop or acquire may not be introduced in a
timely or cost- effective manner and may not achieve the broad market acceptance necessary to help increase overall gross margin. If we are
unable to successfully develop or acquire and then market and sell additional software and hardware functionality, our business could be
adversely affected.

OUR ABILITY TO SELL OUR PRODUCTS IS HIGHLY DEPENDENT ON THE QUALITY OF OUR SUPPORT SERVICES, AND ANY
FAILURE TO OFFER HIGH-QUALITY SUPPORT SERVICES COULD REDUCE PRODUCT SALES AND REVENUE.

          After our products are deployed within our customers’ networks, customers depend on our support services organization to resolve
issues relating to our products and how they perform within the customer’s environment. High-quality support services are critical for the
successful marketing and sale of our products. If we do not succeed in helping our customers to quickly resolve post-deployment issues and
provide ongoing support if our partners do not effectively assist customers in deploying products, it would adversely affect our ability to sell
products to existing customers and could harm prospects with potential customers. As a result, failure to maintain high-quality support services
could reduce product sales and revenue.


                                                                        8
OUR PRODUCTS ARE HIGHLY TECHNICAL AND MAY CONTAIN UNDETECTED SOFTWARE OR HARDWARE DEFECTS,
WHICH COULD CAUSE DATA UNAVAILABILITY, LOSS OR CORRUPTION THAT MIGHT, IN TURN, RESULT IN LIABILITY TO
CUSTOMERS, HARM TO ICEWEB’S REPUTATION AND/OR A REDUCTION OF PRODUCT SALES AND REVENUE.

           Our network storage products are highly technical and complex and are often used to store information critical to customers’ business
operations. Our products have contained and may contain undetected errors, defects or security vulnerabilities that could result in data
unavailability, loss or corruption or other harm to customers. Some errors in our products may only be discovered after they have been installed
and used by customers. Any errors, defects or security vulnerabilities discovered in our products after commercial release, as well as any
computer virus or human error on the part of our customer support or other personnel resulting in the unavailability, loss or corruption of a
customer’s data, could result in a loss of customers or increased support and warranty costs, any of which may adversely affect our business,
operating results and financial condition. In addition, we could face claims for product liability, tort or breach of warranty, including claims
relating to changes to our products made by partners. Our contracts with customers contain provisions relating to warranty disclaimers and
liability limitations, which may be difficult to enforce. Defending a lawsuit, regardless of its merit, could be costly and might divert
management’s attention and adversely affect the market’s perception of our company and our products. In addition, if our business liability
insurance coverage proves inadequate for a claim, or future coverage is unavailable on acceptable terms or at all, product sales and revenue
could be reduced.

THE FACTORING AGREEMENT WITH SAND HILL FINANCE, LLC CONTAINS CERTAIN TERMS WHICH MAY ADVERSELY
AFFECT THE COMPANY’S ABILITY TO RAISE CAPITAL IN FUTURE PERIODS.

          We are a party to a Finance Agreement with Sand Hill Finance, LLC for an accounts receivable factoring line. As of June 30, 2012,
the principal balance on the factoring line was $2,016,245. Under the terms of the Finance Agreement, we agreed not to take certain actions
including undertaking a transaction which would result in a change of control of IceWEB or the transfer of more than 50% of its securities and
incurring any indebtedness other than trade credit in the ordinary course of business. These restrictions may limit our ability to raise working
capital as needed in the future.

OUR PRIMARY ASSETS SERVE AS COLLATERAL UNDER THE FACTORING LINE. IF WE WERE TO DEFAULT ON THE
FINANCE AGREEMENT, THE LENDER COULD FORECLOSE ON OUR ASSETS AND WE WOULD BE UNABLE TO CONDUCT
OUR BUSINESS AS ITS IS PRESENTLY CONDUCTED.

         The factoring line is collateralized by a blanket security interest encumbering our assets. If we should default under the terms of the
Finance Agreement, Sand Hill Finance, LLC could seek to foreclose on our primary assets. If Sand Hill Finance, LLC were successful, we
would be unable to conduct business as it is presently conducted and our ability to generate revenues and fund ongoing operations would be
materially adversely affected.

MANAGEMENT MAY BE UNABLE TO EFFECTIVELY INTEGRATE ACQUISITIONS AND TO MANAGE GROWTH AND ICEWEB
MAY BE UNABLE TO FULLY REALIZE ANY ANTICIPATED BENEFITS OF THESE ACQUISITIONS.

          Our business strategy includes growth through acquisition and internal development. We are subject to various risks associated with
our growth strategy, including the risk that we will be unable to identify and recruit suitable acquisition candidates in the future or to integrate
and manage the acquired companies. Acquired companies’ histories, geographical locations, business models and business cultures can be
different from ours in many respects. Our directors and senior management face a significant challenge in their efforts to integrate the
businesses and the business of the acquired companies or assets, and to effectively manage continued growth. There can be no assurance that
efforts to integrate the operations of any acquired assets or companies acquired in the future will be successful, that we can manage growth or
that the anticipated benefits of these proposed acquisitions will be fully realized. The dedication of management resources to these efforts may
detract attention from day-to-day business. There can be no assurance that there will not be substantial costs associated with these activities or
of the success of integration efforts, either of which could have a material adverse effect on operating results.


                                                                          9
ECONOMIC CONDITIONS AND WORLD EVENTS COULD AFFECT OUR COMPANY’S OPERATING RESULTS.

          We and our customers could be adversely affected by an economic downturn such as changes in consumer and investor confidence,
instability in the credit and financial markets, volatile corporate profits, and reduced business and consumer spending. The economy as a whole
also may be affected by future world events such as acts of terrorism, developments in the war on terrorism, conflicts in international situations,
and by natural disasters. These factors may affect our results of operations by reducing sales, gross profits and/or net income as a result of a
slowdown in customer orders or order cancellations. In addition, political and social turmoil related to international conflicts and terrorist acts
may put further pressure on economic conditions abroad. Unstable political, social and economic conditions may make it difficult for our
company, our customers, and our suppliers to accurately forecast and plan future business activities. If such conditions persist, our business,
financial condition, results of operations and cash flow could be negatively affected.

THE CONDITION OF THE U.S. AND GLOBAL FINANCIAL MARKETS HAS BEEN VOLATILE AND MAY CONTINUE TO BE
VOLATILE.

         Prospective investors should be aware that the U.S. and global financial markets are currently quite volatile and that the condition of
the financial markets has become significantly weakened and destabilized in the past few years. Continued volatility and instability could
adversely affect our ability to finance our business. Further, financial market instability could result in significant regulatory changes that
would have an unpredictable effect on the financial markets in general.

OUR BUSINESS HAS INHERENT OPERATIONAL RISKS THAT CANNOT BE ADEQUATELY COVERED BY INSURANCE OR
INDEMNITY.

          We may face unanticipated risks of legal liability for damages caused by the actual or alleged failure of technologies and products that
it supplies. We sell products to a variety of large entities, and because of our size, we have limited ability to negotiate favorable commercial
terms in our product purchase/sale documentation. While we have attempted to secure appropriate insurance coverage at reasonable cost it is
not possible to insure against all risks inherent in the markets we serve, nor can we assure investors that our insurers will pay a particular claim,
or that we will be able to maintain coverage at reasonable rates in the future. Substantial claims resulting from a failure of a product to perform
in excess of or not otherwise covered by indemnity or insurance could harm our financial condition and operating results. Insurance policies
also contain deductibles, limitations and exclusions which increase our costs in the event of a claim.


                                                                         10
WE MAY HAVE DIFFICULTY SCALING PRODUCTION TO LARGE VOLUMES. IF WE ARE UNABLE TO MEET DEMAND OR TO
EFFICIENTLY INCREASE PRODUCTION, CUSTOMERS MAY TURN TO PRODUCTS OFFERED BY COMPETITORS AND OUR
OPERATING RESULTS COULD BE ADVERSELY AFFECTED.

         We may have difficulty dealing with rapid growth. If demand for products increases rapidly, we may need to expand internal
production capacity or implement outsourcing. Success in developing, manufacturing and supporting products manufactured in small volumes
does not assure comparable success in operations conducted on a larger scale. It may be necessary to expand capacity beyond existing space,
personnel and equipment and we may be unable to do so. Modifying our facilities and operations to increase production capacity may delay
delivery of products. Manufacturing efficiencies, yields and product quality may decline as production volumes increase. In addition,
component costs, overhead and other production costs may rise. If we are unable to meet the demand of customers and deliver quality products
quickly and cost effectively, customers may turn to our competitors. The costs associated with implementing new manufacturing technologies,
methods and processes, including the purchase of new equipment, and any resulting delays, inefficiencies and loss of sales could harm results
of operations.

OUR SUCCESS AND COMPETITIVE POSITION DEPENDS ON OUR ABILITY TO OBTAIN AND PROTECT INTELLECTUAL
PROPERTY. FAILURE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS WOULD IMPAIR OUR ABILITY TO COMPETE
EFFECTIVELY AND DEFEND AGAINST THIRD PARTY CLAIMS THAT WE ARE INFRINGING ON THE INTELLECTUAL
PROPERTY RIGHTS OF OTHERS.

         We maintain our proprietary technology and know-how as trade secrets as well as through the use of patents. Some of our proprietary
technology may be covered by provisional patents. Our policy is to use confidentiality agreements, licensing agreements and similar
arrangements to establish and protect intellectual property. For example, our policy is to maintain confidentiality agreements with our
employees, consultants, vendors and business partners and this has controlled access to, and distribution of its product design documentation
and other proprietary information. We intend to continue to protect existing and new processes and technologies that are developed as trade
secrets but may not be able to do so. We hold or have filed patents related to several of our products and technology, however there is no
guarantee that we will be able to enforce these patents or that the applications will be issued as patents. Failure to protect our intellectual
property could affect our ability to secure additional contracts or preserve market advantages as we develops and commercializes our products.

         Our efforts to protect our intellectual property rights may not:

   •   prevent challenges to, or the invalidation or circumvention of, existing intellectual property rights;
   •   prevent competitors from independently developing similar products or duplicating our products;
   •   provide adequate protection for intellectual property rights;
   •   prevent disputes with third parties regarding ownership of our intellectual property rights;
   •   prevent disclosure of trade secrets and know-how to third parties or their release into the public domain; or
   •   prevent our company from being subject to claims of infringement of the intellectual property rights of third-parties.

          Others may attempt to copy or otherwise obtain and use our proprietary technologies without consent. Monitoring the unauthorized
use of technologies is difficult. There is a significant risk that customers or their end-user customers may attempt to copy or otherwise obtain
and use our proprietary technologies without our consent.

          We may find it necessary to litigate against others, including customers, to protect our intellectual property and to challenge the
validity and scope of the proprietary rights asserted by others, and the company could face counterclaims. Legal disputes with customers could
adversely affect relationships and sales. Litigation is inherently uncertain, and an adverse outcome could subject us to significant liability for
damages or invalidate our proprietary rights. The complexity of the technology involved and inherent uncertainty and cost of intellectual
property litigation increases our risks.


                                                                        11
          Third parties may claim that we are infringing on their intellectual property rights, and we may already be unknowingly infringing.
We may face additional liability if we agree to indemnify customers against third party infringement claims. If a third party establishes that we
are infringing upon our intellectual property rights, we may be forced to modify products or manufacturing processes and such changes may be
expensive or impractical. We may be forced to seek royalty or license agreements. If we are unable to agree on acceptable terms, we may be
required to discontinue products or to halt other aspects of our operations. We may also be liable for significant damages. Even if intellectual
property claims brought against us are without merit, the litigation may be costly and time consuming, and may divert management and key
personnel from normal business operations.

OUR EFFORTS TO PROTECT OUR INTELLECTUAL PROPERTY MAY BE LESS EFFECTIVE IN SOME FOREIGN COUNTRIES
WHERE INTELLECTUAL PROPERTY RIGHTS MAY NOT BE AS STRONG AS IN THE UNITED STATES.

         We have not obtained and may not obtain patent or similar protection for our proprietary technologies or registration for our
trademarks in foreign countries, which may impair our ability to use or protect our technology and brand in foreign jurisdictions. The laws of
some foreign countries, including countries in which we have sold and/or plan to sell products, protect proprietary rights less broadly than do
the laws of the United States. Many U.S. companies have encountered substantial problems in protecting their proprietary rights in such
countries, and there is a risk that we may encounter similar problems. If our competitors in these countries copy our technology without our
permission, our sales and operations may be harmed.

WE HAVE BEEN ENGAGED IN VARIOUS LEGAL DISPUTES WHICH COULD IMPACT OUR COMPANY AND OUR SUPPLIER
RELATIONSHIPS.

          We are currently engaged in three legal proceedings. These legal proceedings relate to non-payment of vendors. A number of these
suppliers, if not all of them, may be paid and satisfied prior to that closing. Claims relating to these proceedings currently total approximately
between $50,000 and $100,000. These and/or the remaining and/or future potential legal proceedings could impact our financial position and/or
our relationships with customers, vendors, suppliers, distributors and/or other parties.

                                          RISKS RELATING TO ICEWEB’S COMMON STOCK

THE EXERCISE OF WARRANTS AND OPTIONS AND THE CONVERSION OF SHARES OF OUR SERIES B CONVERTIBLE
PREFERRED STOCK AND CONVERTIBLE NOTES PAYABLE WILL BE DILUTIVE TO EXISTING SECURITY HOLDERS.

         At June 30, 2012 we had outstanding:

    •   187,071,442 shares of common stock,
    •   626,667 shares of Series B convertible preferred stock which is convertible into 626,667 shares of common stock,
    •   common stock purchase warrants and options to purchase 94,797,072 shares of common stock with a variety of exercise prices, rights
        and provisions, and
    •   outstanding notes with a principal balance of $1,127,888 of convertible notes which at the current market price is convertible into
        15,241,730 common shares.


                                                                       12
         The exercise of the outstanding options and warrants or the conversion of the outstanding convertible securities will be dilutive to our
security holders.

PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS MAY DELAY OR PREVENT A TAKE-OVER WHICH
MAY NOT BE IN THE BEST INTERESTS OF OUR SECURITY HOLDERS.

         Provisions of our certificate of incorporation and bylaws may be deemed to have anti-takeover effects, which include when and by
whom special meetings of security holders may be called, and may delay, defer or prevent a takeover attempt. In addition, certain provisions of
the Delaware General Corporations Law also may be deemed to have certain anti-takeover effects, including a provisions stipulating that
control of shares acquired in excess of certain specified thresholds will not possess any voting rights unless these voting rights are approved by
a majority of a corporation’s disinterested security holders.

         In addition, our certificate of incorporation authorizes the issuance of up to 10,000,000 shares of preferred stock with such rights and
preferences as may be determined from time to time by our board of directors. We presently have outstanding 626,667 shares of Series B
convertible preferred stock owned by the estate of former CEO and Chairman John R. Signorello. Our board of directors may, without
stockholder approval, issue additional series of preferred stock with dividends, liquidation, conversion, voting or other rights that could
adversely affect the voting power or other rights of the holders of our common stock.

PUBLIC COMPANY COMPLIANCE MAY MAKE IT MORE DIFFICULT TO ATTRACT AND RETAIN OFFICERS AND DIRECTORS.

           The Sarbanes-Oxley Act of 2002, the Dodd-Frank Act and rules subsequently implemented by the Commission have required changes
in corporate governance practices of public companies. As a public company, we expect these rules and regulations to continue to increase
compliance costs in 2012 and beyond and to make certain activities more time consuming and costly than if we were not a public company. As
a public company, we also expect that these rules and regulations may make it more difficult and expensive to obtain director and officer
liability insurance in the future and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to
obtain the same or similar coverage. As a result, it may be more difficult to attract and retain qualified persons to serve on our board of
directors or as executive officers.

OUR STOCK PRICE MAY BE VOLATILE IN RESPONSE TO MARKET AND OTHER FACTORS.

        The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors,
many of which are beyond our control, including the following:

    •    competitive pricing pressures;
    •    ability to obtain working capital financing;
    •    additions or departures of key personnel;
    •    limited public float in the hands of a small number of persons whose sales or lack of sales could result in positive or negative pricing
         pressure on the market price for our common stock;
    •    sales of common stock
    •    ability to execute our business plan;
    •    operating results that fall below expectations;
    •    loss of any strategic relationship;
    •    regulatory or legal developments;


                                                                        13
    •    economic and other external factors; and
    •    period-to-period fluctuations in our financial results.

         In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to
the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our
common stock.

OUR COMMON STOCK IS A “PENNY STOCK,” WHICH WILL MAKE IT MORE DIFFICULT FOR INVESTORS TO SELL THEIR
SHARES.

          Our common stock is presently subject to the “penny stock” rules adopted under Section 15(g) of the Securities Exchange Act of
1934. The penny stock rules apply to companies whose common stock is not listed on a national securities exchange and trades at less than
$5.00 per share or that have tangible net worth of less than $2,500,000, or $2,000,000 if the company has been operating for three or more
years. In certain instances, these rules require, among other things, that brokers who trade penny stock to persons other than “established
customers” complete certain documentation, make suitability inquiries of investors and provide investors with certain information concerning
trading in the security, including a risk disclosure document and quote information under certain circumstances. In addition, many brokers and
broker-dealers have decided not to trade penny stocks because of the requirements of the penny stock rules and, as a result, the number of
broker-dealers willing to act as market makers in such securities is limited. If we continue to remain subject to the penny stock rules, it could
have an adverse effect on the market, if any, for our common stock, and investors will find it more difficult to dispose of the securities.

OFFERS OR AVAILABILITY FOR SALE OF A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK MAY CAUSE
THE PRICE OF OUR COMMON STOCK TO DECLINE.

          If security holders sell substantial amounts of our common stock in the public market, or upon the expiration of any statutory holding
period, under Rule 144, or expiration of lock-up periods applicable to outstanding shares, or issued upon the exercise of outstanding options or
warrants, it could create a circumstance commonly referred to as an “overhang” and in anticipation of which the market price of our common
stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could make more difficult our ability
to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or
appropriate.

OUR COMMON STOCK MAY BE SUBJECT TO FURTHER DILUTION IF WE SELL ADDITIONAL SHARES OF OUR COMMON
STOCK IN THE FUTURE AT PRICES BELOW THE PRICES IN ITS RECENT PRIVATE OFFERINGS.

          If it becomes necessary for us to issue additional shares of common stock in the future at prices below the prices that trigger the
anti-dilution protections in connection with previous private offerings, we will be required to issue such additional shares and lower the warrant
exercise price of the existing warrants, in order to account for the dilutive impact of such future issuances. The anti-dilutive protections are
known as “full-ratchet” protections, meaning that the additional shares of common stock to be issued, and the new exercise price of the
warrants, will match the lowest price at which we issue additional shares of common stock in the future. These additional shares of common
stock, and warrants to purchase additional shares of common stock, if exercised, could result in substantial future dilution to the holders of our
common stock. We currently have warrants outstanding to purchase 36,088,554 shares of common stock which contain “full-ratchet”
protections.

IF THE SELLING SECURITY HOLDERS ALL ELECT TO SELL THEIR SHARES OF OUR COMMON STOCK AT THE SAME TIME,
THE MARKET PRICE OF OUR SHARES MAY DECREASE.

          It is possible that the selling security holders will offer all of the shares for sale. Further, because it is possible that a significant
number of shares could be sold at the same time hereunder, the sales, or the possibility thereof, may have a depressive effect on the market
price of our common stock.


                                                                        14
                           MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Our common stock is quoted on the OTC Bulletin Board under the symbol “IWEB”. The reported high and low sales prices for the
common stock as reported on the OTC Bulletin Board are shown below for the periods indicated. The quotations reflect inter-dealer prices,
without retail mark-up, markdown or commission, and may not represent actual transactions.
                                                                                                           High                  Low
Fiscal 2010
First quarter ended December 31, 2009                                                                 $          0.235 $               0.07
Second quarter ended March 31, 2010                                                                   $           0.23 $              0.075
Third quarter ended June 30, 2010                                                                     $           0.47 $              0.135
Fourth quarter ended September 30, 2010                                                               $           0.30 $              0.105

Fiscal 2011
First quarter ended December 31, 2010                                                                           $         0.315     $          0.155
Second quarter ended March 31, 2011                                                                             $         0.285     $           0.16
Third quarter ended June 30, 2011                                                                               $         0.295     $          0.171
Fourth quarter ended September, 30, 2011                                                                        $          0.26     $          0.135

Fiscal 2012
First quarter ended December 31, 2011                                                                           $         0.195     $          0.102
Second quarter ended March 31, 2012                                                                             $        0.1847     $          0.106
Third quarter ended June 30, 2012                                                                               $         0.181     $          0.107

On August 17, 2012, the last sale price of our common stock as reported on the OTC Bulletin Board was $0.075. As of August 17, 2012, there
were approximately 4,300 record owners of our common stock.

                                                               DIVIDEND POLICY

        We have never paid cash dividends on our common stock. Under Delaware law, we may declare and pay dividends on our capital stock
either out of our surplus, as defined in the relevant Delaware statutes, or if there is no such surplus, out of our net profits for the fiscal year in
which the dividend is declared and/or the preceding fiscal year. If, however, the capital of our company, computed in accordance with the
relevant Delaware statutes, has been diminished by depreciation in the value of our property, or by losses, or otherwise, to an amount less than
the aggregate amount of the capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of
assets, we are prohibited from declaring and paying out of such net profits and dividends upon any shares of our capital stock until the
deficiency in the amount of capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of
assets shall have been repaired.

Transfer Agent

     Our transfer agent is Olde Monmouth Stock Transfer, 200 Memorial Pkwy, Atlantic Highlands, NJ 07716. Its telephone number is (732)
872-2727.

                                                           PLAN OF DISTRIBUTION

          We are registering the shares of common stock issuable upon conversion of the notes and exercise of the warrants to permit the resale
of these shares of common stock by the holders of the notes and warrants from time to time after the date of this prospectus. We will not
receive any of the proceeds from the sale by the selling security holders of the shares of common stock. We will bear all fees and expenses
incident to our obligation to register the shares of common stock.


                                                                          15
          The selling security holders may sell all or a portion of the shares of common stock held by them and offered hereby from time to time
directly or through one or more underwriters, broker-dealers or agents. If the shares of common stock are sold through underwriters or
broker-dealers, the selling security holders will be responsible for underwriting discounts or commissions or agent’s commissions. The shares
of common stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices
determined at the time of sale or at negotiated prices. These sales may be effected in transactions, which may involve crosses or block
transactions, pursuant to one or more of the following methods:

             on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;
             in the over-the-counter market;
             in transactions otherwise than on these exchanges or systems or in the over-the-counter market;
             through the writing or settlement of options, whether such options are listed on an options exchange or otherwise;
             ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
             block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block
              as principal to facilitate the transaction;
             purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
             an exchange distribution in accordance with the rules of the applicable exchange;
             privately negotiated transactions;
             short sales made after the date the Registration Statement is declared effective by the SEC;
             broker-dealers may agree with a selling security holder to sell a specified number of such shares at a stipulated price per share;
             a combination of any such methods of sale; and
             any other method permitted pursuant to applicable law.

          The selling security holders may also sell shares of common stock under Rule 144 promulgated under the Securities Act of 1933, as
amended, if available, rather than under this prospectus. In addition, the selling security holders may transfer the shares of common stock by
other means not described in this prospectus. If the selling security holders effect such transactions by selling shares of common stock to or
through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts,
concessions or commissions from the selling security holders or commissions from purchasers of the shares of common stock for whom they
may act as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters,
broker-dealers or agents may be in excess of those customary in the types of transactions involved). In connection with sales of the shares of
common stock or otherwise, the selling security holders may enter into hedging transactions with broker-dealers, which may in turn engage in
short sales of the shares of common stock in the course of hedging in positions they assume. The selling security holders may also sell shares of
common stock short and deliver shares of common stock covered by this prospectus to close out short positions and to return borrowed shares
in connection with such short sales. The selling security holders may also loan or pledge shares of common stock to broker-dealers that in turn
may sell such shares.

         The selling security holders may pledge or grant a security interest in some or all of the notes, warrants or shares of common stock
owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares
of common stock from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable
provision of the Securities Act of 1933 amending, if necessary, the list of selling security holders to include the pledgee, transferee or other
successors in interest as selling security holders under this prospectus. The selling security holders also may transfer and donate the shares of
common stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus.

          To the extent required by the Securities Act of 1933 and the rules and regulations thereunder, the selling security holders and any
broker-dealer participating in the distribution of the shares of common stock may be deemed to be “underwriters” within the meaning of the
Securities Act of 1933, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be
underwriting commissions or discounts under the Securities Act of 1933. At the time a particular offering of the shares of common stock is
made, a prospectus supplement, if required, will be distributed, which will set forth the aggregate amount of shares of common stock being
offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms
constituting compensation from the selling security holders and any discounts, commissions or concessions allowed or re-allowed or paid to
broker-dealers.


                                                                        16
          Under the securities laws of some states, the shares of common stock may be sold in such states only through registered or licensed
brokers or dealers. In addition, in some states the shares of common stock may not be sold unless such shares have been registered or qualified
for sale in such state or an exemption from registration or qualification is available and is complied with.

          There can be no assurance that any selling stockholder will sell any or all of the shares of common stock registered pursuant to the
registration statement, of which this prospectus forms a part.

         The selling security holders and any other person participating in such distribution will be subject to applicable provisions of the
Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, including, without limitation, to the extent applicable,
Regulation M of the Securities Exchange Act of 1934, which may limit the timing of purchases and sales of any of the shares of common stock
by the selling security holders and any other participating person. To the extent applicable, Regulation M may also restrict the ability of any
person engaged in the distribution of the shares of common stock to engage in market-making activities with respect to the shares of common
stock. All of the foregoing may affect the marketability of the shares of common stock and the ability of any person or entity to engage in
market-making activities with respect to the shares of common stock.

          We will pay all expenses of the registration of the shares of common stock pursuant to the registration rights agreement, estimated to
be approximately $34,000 in total, including, without limitation, Securities and Exchange Commission filing fees and expenses of compliance
with state securities or “blue sky” laws; provided, however, a selling stockholder will pay all underwriting discounts and selling commissions,
if any. We will indemnify the selling security holders against liabilities, including some liabilities under the Securities Act of 1933 in
accordance with the registration rights agreements or the selling security holders will be entitled to contribution. We may be indemnified by the
selling security holders against civil liabilities, including liabilities under the Securities Act of 1933 that may arise from any written
information furnished to us by the selling stockholder specifically for use in this prospectus, in accordance with the related registration rights
agreements or we may be entitled to contribution.

         Once sold under the registration statement, of which this prospectus forms a part, the shares of common stock will be freely tradable in
the hands of persons other than our affiliates.

                                   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
                                         CONDITION AND RESULTS OF OPERATIONS

BUSINESS OF ICEWEB

        Headquartered just outside of Washington, D.C., we manufacture and market unified data storage, purpose built appliances, network
and cloud attached storage solutions and deliver on-line cloud computing application services.
        Our customer base includes U.S. government agencies, enterprise companies, and small to medium sized businesses (SMB).

Data Storage

          A unified storage system simultaneously enables storage of file data and handles the block-based I/O (input/output) of enterprise
applications. We believe one advantage of unified storage is reduced hardware requirements. Instead of separate storage platforms, like NAS
(network attached storage) for file-based storage and a RAID (Redundant Array of Independent Disks) disk array for block-based storage,
unified storage combines both modes in a single device. Alternatively, a single device could be deployed for either file or block storage as
required.


                                                                       17
          In addition to lower capital expenditures for the enterprise, unified storage systems can also be simpler to manage than separate
products. The IceWEB Storage System offers one platform for file and block data of all kinds . The IceWEB Storage System is an
all-inclusive storage management system which includes de-duplication; unlimited snapshots; thin provisioning; local or remote, real-time or
scheduled replication; capacity and utilization reporting, and integration with virtual server environments. Unified storage systems enjoy the
same level of reliability as dedicated file or block storage systems.

Distribution

          We believe that Promark is one of the premier value added distributors (VAD) in the United States. Promark’s core technology focus
is distributing data storage and electronic document imaging products and solutions through a two-tier distribution channel selling to VARs and
system integrators. Promark leverages its direct relationships with technology partners including LeftHand Networks, Kodak, QLogic, Data
Domain, Panasonic, NEC, Overland Storage and many more to provide solutions that meet the most demanding needs of our customers.

          We generate revenues from the manufacture and sale of high-performance unified data storage products, data storage appliances and
servers, the sale of software services, and the distribution of data storage and electronic imaging products and solutions. We believe that the
key factors to our continued growth and profitability include the following:

         •      Increasing the number of channel partners selling our products
         •      Continued investment in product development and research efforts
         •      Hiring additional qualified, technical employees, and
         •      Increasing the number of new customers added.

GOING CONCERN

          We have a history of losses and have incurred net losses of approximately $40.9 million since inception through June 30, 2012. Our
current operations are not an adequate source of cash to fund future operations. The report of our independent registered public accounting firm
on our consolidated financial statements for the years ended September 30, 2011 and 2010 contains an explanatory paragraph regarding our
ability to continue as a going concern based upon our net losses. Our ability to continue as a going concern is dependent upon our ability to
obtain the necessary financing to meet our obligations and repay our liabilities when they become due and to generate profitable operations in
the future. We plan to continue to provide for our capital requirements through the sale of equity securities and debt, however, we have no firm
commitments from any third party to provide this financing and we cannot assure you we will be successful in raising working capital as
needed. There are no assurances that we will have sufficient funds to execute our business plan, pay our operating expenses and obligations as
they become due or generate positive operating results.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

      Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of such
statements requires us to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period
and the reported amounts of assets and liabilities as of the date of the financial statements. Our estimates are based on historical experience and
other assumptions that we consider to be appropriate in the circumstances. However, actual future results may vary from our estimates.

      We believe that the following accounting policies are significantly affected by critical accounting estimates and that they are both highly
important to the portrayal of our financial condition and results and require difficult management judgments and assumptions about matters that
are inherently uncertain. Note 2 of the accompanying consolidated financial statements describes the significant accounting policies used in the
preparation of the consolidated financial statements. Certain of these significant accounting policies are considered to be critical accounting
policies.

      We believe the accounting policies described below are those that most frequently require us to make estimates and judgments and
therefore are critical to the understanding of our results of operations.


                                                                        18
     Revenue Recognition, Reserves and Allowances

       Revenue Recognition — We recognize revenue when:

 •      Persuasive evidence of an arrangement exists: It is our customary practice to have a purchase order and/or contract prior to recognizing
        revenue on an arrangement from our end users, customers, value-added resellers, or distributors.

 •      Delivery has occurred: Our product is physically delivered to our customers, generally with standard transfer terms such as freight on
        board, or FOB, origin. We typically do not allow for restocking rights with any of our value-added resellers or distributors. Products
        shipped with acceptance criteria or return rights are not recognized as revenue until all criteria are achieved. If undelivered products or
        services exist that are essential to the functionality of the delivered product in an arrangement, delivery is not considered to have
        occurred.

 •      The fee is fixed or determinable: Arrangements with payment terms extending beyond our standard terms, conditions and practices are
        not considered to be fixed or determinable. Revenue from such arrangements is recognized at the earlier of customer payment or when
        the fees become due and payable. We typically do not allow for price-protection rights with any of our value-added resellers or
        distributors.

 •      Collection is reasonably assured: If there is considerable doubt surrounding the credit worthiness of a customer at the outset of an
        arrangement, the associated revenue is deferred and recognized upon cash receipt.

      We maintain a separate allowance for doubtful accounts for estimated losses based on our assessment of the collectability of specific
customer accounts and the aging of the accounts receivable. We analyze accounts receivable and historical bad debts, customer concentrations,
customer solvency, current economic and geographic trends, and changes in customer payment terms and practices when evaluating the
adequacy of our current and future allowance. In circumstances where we are aware of a specific customer’s inability to meet its financial
obligations to us, a specific allowance for bad debt is estimated and recorded, which reduces the recognized receivable to the estimated amount
we believe will ultimately be collected. We monitor and analyze the accuracy of our allowance for doubtful accounts estimate by reviewing
past collectability and adjusting it for future expectations to determine the adequacy of our current and future allowance. If the financial
condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be
required.

     Inventory Valuation

      Inventories are stated at lower of cost or market, on an average cost basis . We perform an excess and obsolete analysis of our inventory
based upon assumptions about future demand and market conditions. We adjust the inventory value based on estimated excess and obsolete
inventories.

     Valuation of Intangibles

      We periodically review the estimated remaining useful lives of our intangible assets. A reduction in the estimate of remaining useful life
could result in accelerated amortization expense or a write-down in future periods. As such, any future write-downs of these assets would
adversely affect our operating results.

     Stock-Based Compensation

      We account for stock-based compensation using the Black-Scholes option pricing model to estimate the fair value of each option grant
on the date of grant. Our option pricing model requires the input of highly subjective assumptions, including the expected stock price volatility,
expected term, and forfeiture rate. Any changes in these highly subjective assumptions significantly impact stock-based compensation expense.


                                                                          19
   Fair Value Measurements and Impairments

      All of our investments and nonmarketable securities are subject to periodic impairment review. Investments are considered to be
impaired when a decline in fair value is judged to be other-than-temporary. This determination requires significant judgment. For publicly
traded investments, impairment is determined based upon the specific facts and circumstances present at the time, including factors such as
current economic and market conditions, the credit rating of the security’s issuer, the length of time an investment’s fair value has been below
our carrying value, and our ability and intent to hold investments to maturity or for a period of time sufficient to allow for any anticipated
recovery in fair value. If an investment’s decline in fair value, caused by factors other than changes in interest rates, is deemed to be
other-than-temporary, we reduce its carrying value to its estimated fair value, as determined based on quoted market prices, liquidation values
or other metrics. For investments in publicly held companies, we recognize an impairment charge when the decline in the fair value of our
investment is below its cost basis and is judged to be other-than-temporary. The ultimate value realized on these investments is subject to
market price volatility until they are sold.

      Pursuant to the accounting guidance for fair value measurement and its subsequent updates, fair value is defined as the price that would
be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the
measurement date. The accounting guidance establishes a hierarchy for inputs used in measuring fair value that minimizes the use of
unobservable inputs by requiring the use of observable market data when available. Observable inputs are inputs that market participants would
use in pricing the asset or liability based on active market data. Unobservable inputs are inputs that reflect the assumptions market participants
would use in pricing the asset or liability based on the best information available in the circumstances.

      The fair value hierarchy is broken down into the three input levels summarized below:

       •    Level 1 — Valuations are based on quoted prices in active markets for identical assets or liabilities and readily accessible by us at
            the reporting date. Examples of assets and liabilities utilizing Level 1 inputs are certain money market funds, U.S. Treasuries and
            trading securities with quoted prices on active markets.

       •    Level 2 — Valuations based on inputs other than the quoted prices in active markets that are observable either directly or indirectly
            in active markets. Examples of assets and liabilities utilizing Level 2 inputs are U.S. government agency bonds, corporate bonds,
            commercial paper, certificates of deposit and over-the-counter derivatives.

       •    Level 3 — Valuations based on unobservable inputs for which there are little or no market data, which require us to develop our
            own assumptions. Examples of assets and liabilities utilizing Level 3 inputs are cost method investments, auction rate securities
            (ARS) and the primary fund.

Results of Operations

THREE AND NINE MONTHS ENDED JUNE 30, 2012 COMPARED TO THE THREE AND NINE MONTHS ENDED JUNE 30,
2011

        The following table provides an overview of certain key factors of our results of operations for the three and nine months ended June
30, 2012 as compared to the three and nine months ended June 30, 2011:

                                                                      Three months ended June 30,               Nine Months Ended June 30,
                                                                         2012             2011                     2012            2011
Net Revenues                                                         $     654,996 $        719,727           $    2,546,852 $     2,514,164
Cost of sales                                                              444,015          380,784                1,669,704       1,317,299
Operating Expenses:
Sales and marketing expense                                                      308,698          123,955            641,255             898,299
Depreciation and amortization                                                     33,797          124,831            149,435             418,625
Research and development                                                         289,242          187,810            708,325             547,579
General and administrative                                                       438,795          495,963          1,331,939           1,617,786
Total operating expenses                                                       1,070,532          932,559          2,830,954           3,482,289
Loss from operation                                                             (859,551 )       (593,616 )       (1,953,806 )        (2,285,424 )
Total other income (expense)                                                  (3,140,324 )       (104,653 )       (4,569,124 )          (302,908 )
Net income (loss)                                                    $        (3,999,875 )   $   (698,269 )   $   (6,522,930 )   $    (2,588,332 )


                                                                         20
Other Key Indicators:

                                                                          Three months ended                   Nine Months Ended
                                                                                June 30,                            June 30,
                                                                          2012           2011                 2012            2011
Cost of sales as a percentage of revenues                                      67.8 %         52.9 %               65.6 %          52.4 %
Gross profit margin                                                            32.2 %         47.1 %               34.4 %          47.6 %
General and administrative expenses as a percentage of revenues                67.0 %         68.9 %               52.3 %          64.3 %
Total operating expenses as a percentage of revenues                          163.4 %        129.6 %              111.2 %         138.5 %

Nine Months ended June 30, 2012

Revenues

    For the Nine Months Ended June 30, 2012, we reported revenues of $2,546,852 as compared to revenues of $2,514,164 for the Nine
Months Ended June 30, 2011, an increase of $32,688 or approximately 1%.

Cost of Sales

      Our cost of sales consists primarily of component parts for the manufacture of our storage products. For the Nine Months Ended June 30,
2012, cost of sales was $1,669,704, or approximately 65.6% of revenues, compared to $1,317,299, or approximately 52.4% of revenues for the
Nine Months Ended June 30, 2011. The increase in costs of sales as a percentage of revenue and the corresponding decrease in our gross profit
margin for the Nine Months Ended June 30, 2012 as compared to the Nine Months Ended June 30, 2011 was the result of pricing pressure to
win sales opportunities during the Nine Months Ended June 30, 2012 as a percentage of total revenue, as well as increased component costs
which resulted from the disruption in the world wide supply of hard drives stemming from the flooding in Thailand in October, 2011. We
anticipate that our gross profit margins will remain in the range of 30% to 45% through the balance of fiscal 2012.

Total Operating Expenses

     Our total operating expenses decreased approximately 19% to $2,830,954 for the Nine Months Ended June 30, 2012 as compared to
$3,482,289 for the Nine Months Ended June 30, 2011. These changes include:

      •       Sales and marketing expense . Sales and marketing expense includes salaries, commission, occupancy, telephone, travel, and
entertainment expenses for direct sales personnel. For the Nine Months Ended June 30, 2012, sales and marketing costs were $641,255 as
compared to $898,299 for the Nine Months Ended June 30, 2011, a decrease of $257,044 or approximately 29%. The decrease is primarily
due to lower sales and marketing headcount.

    •        Depreciation and amortization expense . For the Nine Months Ended June 30, 2012, depreciation and amortization expense
amounted to $149,435 as compared to $418,625 for the Nine Months Ended June 30, 2011, a decrease of $269,190 or 64%.

     •        Research and development . For the Nine Months Ended June 30, 2012, research and development costs were $708,325 as
compared to $547,579 for the Nine Months Ended June 30, 2011, an increase of $160,745 or approximately 29%. Research and development
expense is higher due to higher headcount and consulting costs to support our efforts in product development.

     •       General and administrative expense . For the Nine Months Ended June 30, 2012, general and administrative expenses were
$1,331,939 as compared to $1,617,786 for the Nine Months Ended June 30, 2011, a decrease of $285,847 or approximately 18%. For the Nine
Months Ended June 30, 2012 and 2011 general and administrative expenses consisted of the following:


                                                                     21
                                                                                Fiscal Q3        Fiscal Q3
                                                                                  2012             2011
                                      Occupancy                               $      28,747    $      24,227
                                      Consulting                                       7,480          77,874
                                      Employee compensation                         570,691          896,012
                                      Professional fees                             133,531           57,895
                                      Internet/Phone                                   4,988          16,744
                                      Travel/Entertainment                           27,492           29,787
                                      Investor Relations                            430,271          251,568
                                      Insurance                                      11,771           31,073
                                      Other                                         116,968          232,606
                                                                              $ 1,331,939      $ 1,617,786


    •      For the Nine Months Ended June 30, 2012, occupancy expense increased to $28,747 as compared to $24,227, primarily due to an
           increased allocation of rent expense to administration.

    •      For the Nine Months Ended June 30, 2012, consulting expense decreased to $7,480 as compared to $77,874. Consulting expense
           decreased primarily as a result of nonrecurring recruiting costs incurred to hire engineering, sale and marketing personnel incurred in
           the prior year.

    •      For the Nine Months Ended June 30, 2012, salaries and related expenses decreased to $570,691 as compared to $896,012, a decrease
           of $325,321. The decrease is due primarily to lower non-cash compensation expense of $39,302 as compared to $304,039.

    •      For the Nine Months Ended June 30, 2012, professional fees expense increased to $133,531 as compared to $57,895. Professional fees
           expense increased due to increased costs related to intellectual property patent applications and other legal fees.

    •      For the Nine Months Ended June 30, 2012, internet and telephone expense decreased to $4,988 as compared to $16,744. The
           decrease was primarily due to cost-cutting measures implemented by us.

    •      For the Nine Months Ended June 30, 2012, travel and entertainment expense decreased to $27,492 as compared to $29,787. The
           decrease was primarily due to less travel related to investor relations and analyst meetings.

    •      For the Nine Months Ended June 30, 2012 other expense amounted to $116,968 as compared to $232,606 for the Nine Months Ended
           June 30, 2011, a decrease of $115,638. The decrease is primarily related to increased bad debt expense of $100,000 during the three
           months ended June 30, 2011, which do not recur in the current year quarter.

    •      For the Nine Months Ended June 30, 2012 investor relations expense increased to $430,271 as compared to $251,568 for the Nine
           Months Ended June 30, 2011. The increase is due to increased investor relations activity.

    •      For the Nine Months Ended June 30, 2012, insurance expense decreased to $11,771 as compared to $31,073. The decrease was
           primarily due to cost cutting measures.

        We anticipate that general and administrative expenses will remain stable for the balance of fiscal 2012.

LOSS FROM OPERATIONS

     We reported a loss from operations of $1,953,806 for the Nine Months Ended June 30, 2012 as compared to a loss from operations of
$2,285,424 for the Nine Months Ended June 30, 2011, a decreased loss of $331,618 or approximately 15%.


                                                                         22
OTHER INCOME (EXPENSES)

     Interest Expense . For the Nine Months Ended June 30, 2012, interest expense amounted to $1,796,060 as compared to $302,908 for the
Nine Months Ended June 30, 2011, an increase of $1,493,152 or 493%. The increase in interest expense is primarily attributable to the
amortization of the discount on our outstanding convertible debentures.

      Loss on change of fair value of derivative liability. For the Nine Months Ended June 30, 2012 we incurred an increase in the value of
the derivative liability of $2,773,086. We had no derivative liabilities during the nine months ended June 30, 2011.

NET INCOME/ LOSS

      Our net loss was $6,522,930 for the Nine Months Ended June 30, 2012 compared to a net loss of $2,588,332 for the Nine Months Ended
June 30, 2011.

Three Month Period ended June 30, 2012

Revenues

     For the three months ended June 30, 2012, we reported revenues of $654,996 as compared to revenues of $719,727 for the three months
ended June 30, 2011, a decrease of $64,731 or approximately 9%.

Cost of Sales

      Our cost of sales consists of component parts for the manufacture of our storage products. For the three months ended June 30, 2012, cost
of sales was $444,045, or approximately 67.8% of revenues, compared to $380,784, or approximately 52.9% of revenues, for the three months
ended June 30, 2011. The increase in costs of sales as a percentage of revenue and the corresponding decrease in our gross profit margin for the
three months ended June 30, 2012 as compared to the three months ended June 30, 2011 was the result of lower margins on competitive
opportunities in order to win deals.

Total Operating Expenses

     Our total operating expenses increased approximately 15% to $1,070,532 for the three months ended June 30, 2012 as compared to
$932,559 for the three months ended June 30, 2011. These changes include:

      •        Sales and marketing expense . For the three months ended June 30, 2012, sales and marketing expenses were $308,698 as
compared to $123,955 for the three months ended June 30, 2011, an increase of $184,743 or approximately 149%. The increase was due to
increased headcount and the rollout of our inside sales efforts during the three months ended June 30, 2012.

    •         Depreciation and amortization expense . For the three months ended June 30, 2012, depreciation and amortization expense
amounted to $33,797 as compared to $124,831 for the three months ended June 30, 2011, a decrease of $91,034 or 73%.

     •        Research and development . For the three months ended June 30, 2012, research and development costs were $289,242 as
compared to $187,810 for the three months ended June 30, 2011, an increase of $101,432 or approximately 54%. Research and development
expense is higher due to higher headcount and consulting costs as we continue to invest in product development.

     •         General and administrative expense . For the three months ended June 30, 2012, general and administrative expenses were
$438,795 as compared to $495,963 for the three months ended June 30, 2011, a decrease of $57,169 approximately 12%. For the three months
ended June 30, 2012 and 2011 general and administrative expenses consisted of the following:


                                                                      23
                                                                              Three months ended
                                                                                    June 30,
                                                                               2012          2011
                                  Occupancy                                 $    9,292 $       7,769
                                  Consulting                                     3,015         2,950
                                  Employee compensation                        168,857       338,649
                                  Professional fees                             28,017        25,436
                                  Internet/Phone                                 1,578         4,108
                                  Travel/Entertainment                          10,333        13,667
                                  Investor Relations                           169,040        45,332
                                  Insurance                                      6,053         8,610
                                  Other                                         42,609        49,442
                                                                            $ 438,795 $ 495,963


    •   For the three months ended June 30, 2012, occupancy expense increased to $9,292 as compared to $7,769.

    •   For the three months ended June 30, 2012, consulting expense increased to $3,015 as compared to $2,950, an increase of $65.

    •   For the three months ended June 30, 2012, salaries and related expenses decreased to $168,857 as compared to $338,649, a decrease
        of $169,792, or 50%. The decrease is due primarily to a decrease in non-cash stock and option based compensation expense.

    •   For the three months ended June 30, 2012, professional fees expense increased to $28,017 as compared to $25,436. Professional fees
        expense increased primarily as a result of an increase in legal fees incurred related to business development activities.

    •   For the three months ended June 30, 2012, internet/phone expense decreased to $1,578 as compared to $4,108. Phone expense
        decreased primarily due to cost-cutting measures implemented by us.

    •   For the three months ended June 30, 2012, travel and entertainment expense decreased to $10,333 as compared to $13,667. Travel and
        entertainment expense decreased due to decreased travel for investor relations and general corporate travel activity.

    •   For the three months ended June 30, 2012, insurance expense decreased to $6,053 as compared to $8,610, as a result of cost-cutting
        measures.

    •   For the three months ended June 30, 2012 other expense amounted to $42,609 as compared to $49,442 for the three months ended
        June 30, 2011.

    •   For the three months ended June 30, 2012 investor relations expense increased to $169,040 as compared to $45,332 for the three
        months ended June 30, 2011. The increase is due to increased investor relations activity.

LOSS FROM OPERATIONS

     We reported a loss from operations of $859,551 for the three months ended June 30, 2012 as compared to a loss from operations of
$593,616 for the three months ended June 30, 2011, an increase in loss of $265,935 or approximately 45%.


                                                                    24
OTHER INCOME (EXPENSES)

      Interest Expense . For the three months ended June 30, 2012, interest expense amounted to $984,317 as compared to $104,653 for the
three months ended June 30, 2011, an increase of $672,566 or 643%. The increase in interest expense is primarily attributable to the
amortization of the discount on our outstanding convertible debentures.

      Loss on change of fair value of derivative liability. For the three months ended June 30, 2012 we incurred an increase in the value of
the derivative liability of $2,156,007.

NET INCOME/ LOSS

      Our net loss was $3,999,875 for the three months ended June 30, 2012 compared to a net loss of $698,269 for the three months ended
June 30, 2011.

FISCAL YEAR 2011 AS COMPARED TO FISCAL YEAR 2010

        The following table provides an overview of certain key factors of our results of operations for fiscal year 2011 as compared to fiscal
year 2010:

                                                                Fiscal Year ended September 30,                    $                  %
                                                                  2011                   2010                    Change             Change
                                                                                                                                              )
Net Revenues                                                $        2,678,346        $        3,353,286     $      (674,940 )          (20.1 %
Cost of sales                                                        1,751,640                 1,742,110               9,530              0.5 %
Operating Expenses:
Sales and marketing                                                    975,282                 1,690,684             715,402             42.3 %
Depreciation and amortization                                          545,890                   662,003             116,113             17.5 %
                                                                                                                                              )
Research and development                                               790,048                   547,364            (242,684 )          (44.3 %
General and administrative                                           2,605,999                 5,312,247           2,706,249             50.9 %
Loss on impairment of intangible assets                                303,859                         -            (303,859 )           N/A
Total operating expenses                                             5,221,078                 8,212,298           2,991,220             36.2 %
Loss from operation                                                 (4,294,372 )              (6,601,122 )        (2,306,750 )           34.9 %
                                                                                                                                              )
Total other expense                                                   (410,919 )                (363,111 )            47,808            (13.2 %
Net loss                                                    $       (4,705,291 )      $       (6,964,233 )   $    (2,258,942 )           32.4 %

Other Key Indicators:
                                                                                                       Fiscal          Fiscal
                                                                                                       2011            2010
              Cost of sales as a percentage of revenues                                                   65.40 %         51.95 %
              Gross profit margin                                                                         34.60 %         48.05 %
              General and administrative expenses as a percentage of revenues                             97.30 %        158.42 %
              Total operating expenses as a percentage of revenues                                       194.94 %        244.90 %

Sales

         Our sales decreased approximately 20.1% in fiscal year 2011 from fiscal year 2010. Of our total net sales for fiscal 2011,
approximately $2,520,535 is attributable to our sale of storage products, and approximately $157,811 is attributable to sales from our online
products and services. Of our total net sales for fiscal 2010, approximately $3,152,346 is attributable to our sale of storage products, and
approximately $200,940 is attributable to sales from our online products and services.

         The decrease in fiscal 2011 net sales from fiscal 2010 is primarily due to the impact of economic uncertainty on our customers’
budgets and IT spending capacity. We anticipate revenues for fiscal 2012 will increase due to the introduction of new products and services,
including sales of our Unified Network Storage Solutions and other data storage products.


                                                                       25
Cost of Sales and Gross Profit

        Our cost of sales consists primarily of products purchased to manufacture our storage products. For fiscal 2011, cost of sales was
approximately 65% of sales, as compared to approximately 52% of sales, for fiscal 2010. The increase in costs of sales as a percentage of
revenue and the corresponding decrease in our gross profit margin for fiscal 2011 as compared to fiscal 2010 was the result of an increased
competition and the increase in the cost of certain components that go into our systems in fiscal 2011. We anticipate that our cost of sales as a
percentage of revenue will return to the 50% to 55% range in fiscal 2012, as we introduce new higher margin products and solutions to
augment our storage business.

Total Operating Expenses

         Our total operating expenses decreased approximately 36.4% for fiscal 2011 as compared to fiscal 2010. The decrease is primarily due
to decreased headcount in sales and marketing, and lower costs associated with launching our channel sales distribution model, offset by
increased investment in research and development, and the loss on the impairment of intangible assets. The changes include:

         •        Sales and Marketing . Sales and marketing expense includes salaries, commission, occupancy, telephone, travel, and
entertainment expenses for direct sales personnel. For the fiscal year ended September 30, 2011, sales and marketing costs were $975,282 as
compared to $1,690,684 for the fiscal year ended September 30, 2010, a decrease of $715,402 or approximately 42%. The decrease was due
primarily to reduced sales and marketing headcount during the fiscal year ended September 30, 2011, as we established and relied upon a
two-tier channel distribution model.

       •         Depreciation and amortization expense . For fiscal 2011, depreciation and amortization expense decreased approximately
18% from fiscal 2010, as many of our assets became fully depreciated during the fiscal year.

         Amortization expense is related to the customer relationships and manufacturing GSA schedule which are intangible assets that we
generated through our acquisition of Inline Corporation. The GSA schedule is being amortized on a straight-line basis over three years.
Amortization expense was $243,093 for fiscal 2011 and $243,090 for fiscal 2010.

         •        Research and development expense. For fiscal 2011, research and development expenses increased approximately 44%
from fiscal 2010. This increase is related to increased research and development efforts related to our storage products. We anticipate the
spending on research and development in fiscal 2011 will be approximately $200,000 per quarter related to developing and enhancing our
storage solutions and pursuing intellectual property patents when we believe it is warranted.

         •         Loss on impairment of intangible assets. In fiscal 2011, management determined that the value of certain of our intangible
assets had been impaired due to changes in our sales and marketing approach, and as a result we expensed the remaining unamortized balance
of these assets, totaling $303,859.

         •        General and administrative expense . For fiscal 2011, general and administrative expenses decreased approximately 51%
from fiscal 2010. This decrease is primarily attributable to lower stock-based compensation, lower legal and professional fees, and lower bad
debt expense, offset by higher investor relations expense. For fiscal 2011 and 2010, general and administrative expenses consisted of the
following:

                                                                                                     Fiscal            Fiscal
                                                                                                     2011              2010
              Occupancy                                                                          $      50,208     $      49,085
              Consulting                                                                                87,238           133,784
              Employee compensation                                                                  1,117,737         3,458,814
              Professional fees                                                                        325,105           671,548
              Internet/Phone                                                                            20,479            14,834
              Travel/Entertainment                                                                      34,002            49,016
              Investor Relations                                                                       676,915           358,780
              Insurance                                                                                 35,203            46,304
              Other                                                                                    259,112           530,082
                                                                                                 $   2,605,999     $   5,312,247



                                                                        26
         The principal changes in fiscal 2011 as compared to fiscal 2010 include:

•   For fiscal 2011, salaries and related taxes and benefits decreased $2,341,077, or approximately 68% from fiscal 2010. The decrease was
    primarily attributable to a decrease in stock based compensation, and expense recorded in accordance with ASC Topic 718,
    “Compensation – Stock Compensation, formerly SFAS No. 123 (R), “Share-Based Payments”, for fiscal 2011 of $2,459,103, a decrease
    of 83%.

•   For fiscal 2011, occupancy expense increased approximately 2% from fiscal 2010.

•   For fiscal 2011, professional fees decreased $346,443, or approximately 52% from fiscal 2010. The decrease was primarily attributable to
    a decrease in legal fees incurred and the settlement of lawsuits against us in fiscal 2010 versus 2011.

•   For fiscal 2011, other expense decreased approximately 51% from fiscal 2010. The decrease is primarily due to a decrease in bad debt
    expense of $235,877, and a decrease in hosting fees of $23,022.

•   For fiscal 2011, consulting expense decreased by approximately 35% from fiscal 2010. The decrease was primarily due to non-recurring
    consulting fees related to our capital raising activities, and human resources recruiting fees incurred in 2010 but not in fiscal 2011.

•   For fiscal 2011, investor relations expense increased approximately 89% from fiscal 2010. The increase was attributable to an increase in
    general investor relations activity versus fiscal 2010. We expect that in fiscal 2012 our investor relations activity and related expense
    should decrease to fiscal 2010 levels.

•   For fiscal 2011, internet and telephone expense increased approximately 38%. The increase was attributable to non-recurring costs
    incurred during the fiscal year 2011.

•   For fiscal 2011, travel and entertainment expense decreased approximately 31%. The decrease was attributable to a decrease in general
    business, and travel-related investor relations activity.

•   For fiscal 2011, insurance expense decreased approximately 24% from fiscal 2010. The decrease was attributable to lower premiums paid
    for general business and directors and officer’s insurance.

LOSS FROM OPERATIONS

          Our loss from operations decreased approximately 40% in fiscal year 2011 as compared to fiscal year 2010. This decrease is primarily
the result of reduced headcount, offset by our increased research and development efforts, and our investment in our channel marketing sales
programs.

TOTAL OTHER INCOME (EXPENSES)

         For fiscal 2011, interest expense decreased approximately 25.7%. The decrease in interest expense is primarily attributable to lower
average outstanding note balances during fiscal 2011.

NET LOSS

      Our net loss was $4,705,291 for fiscal 2011 compared to $6,964,233 for fiscal 2010, a decrease of $2,258,942 or approximately 32%.


                                                                      27
LIQUIDITY AND CAPITAL RESOURCES

      Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations and otherwise
operate on an ongoing basis. The following table provides an overview of certain selected balance sheet comparisons between June 30, 2012
and September 30, 2011:

                                                                      June 30,          September 30,          $                      %
                                                                        2012                2011            Change                  Change
Working Capital                                                   $     (5,462,640 )   $     (1,713,333 ) $  (3,749,307 )               218.8 %

Cash                                                                       774,012                 4,120             769,892            18,687.0 %
Accounts receivable, net                                                 1,336,591             1,182,060             154,531                13.1 %
Inventory                                                                  282,602                55,981             226,621               404.8 %
                                                                                                                                                 )
Total current assets                                                     2,437,404             2,450,806             (13,402 )              (0.5 %
Property and equipment, net                                                354,643               252,835             101,808                40.3 %
Marketable Securities                                                      164,000               115,200              48,800                42.3 %
Deferred financing costs, net                                              107,180                     -             107,180                N/A
Total assets                                                             3,078,091             2,832,161             245,930                 8.7 %

                                                                                                                                                 )
Accounts payable and accrued liabilities                                 1,032,235             2,186,691          (1,154,456 )             (52.8 %
                                                                                                                                                 )
Notes payable                                                            2,016,245             1,972,544             (43,701 )              (2.2 %
Convertible notes payable, net of discount                                 328,478                     -             328,478                 0.0 %
Derivative liability                                                     4,523,086                     -           4,523,086                 0.0 %
Total current liabilities                                                7,900,044             4,164,139           3,735,905                89.7 %
Accumulated deficit                                                    (40,851,010 )         (34,328,080 )        (6,522,930 )              19.0 %
Stockholders’ deficit                                                   (4,821,953 )          (1,331,978 )        (3,489,973 )             262.0 %

       Net cash used in operating activities was $4,375,749 for the Nine Months Ended June 30, 2012 as compared to net cash used in operating
activities of $1,827,791 for the Nine Months Ended June 30, 2011, an increase in loss of $2,547,958. For the Nine Months Ended June 30,
2012, we had a loss of $6,522,930 offset by non-cash items such as depreciation and amortization expense of $115,639, share-based
compensation expense of $56,615, amortization of deferred finance costs of $371,737, and decreases from changes in assets and liabilities of
$1,376,994. During the Nine Months Ended June 30, 2012 we experienced an increase in accounts receivable of $154,531, and a decrease in
accounts payable during the period of $989,192. For the nine months ended June 30, 2011, we had a loss of $2,588,332 offset by non-cash
items such as depreciation and amortization expense of $418,625, share-based compensation expense of $585,000, and decreases from changes
in assets and liabilities of $356,452. During the nine months ended June 30, 2011 we experienced an increase in accounts receivable of
$310,677, and a decrease in accounts payable during the period of $61,035

       Net cash used in investing activities for the Nine Months Ended June 30, 2012 was $250,446 as compared to net cash used in investing
activities of $60,061 for the Nine Months Ended June 30, 2011. During the Nine Months Ended June 30, 2012, we used cash of $217,446 for
property and equipment purchases, and $33,000 for the purchase of 3,300,000 of VOIS Inc. common stock. During the Nine Months Ended
June 30, 2011, we used cash of $60,061 for property and equipment purchases.

      Net cash provided by financing activities for the Nine Months Ended June 30, 2012 was $5,396,087 as compared to net cash provided of
$1,351,880 for the Nine Months Ended June 30, 2011. For the Nine Months Ended June 30, 2012, net cash provided by financing activities
related to proceeds received from subscriptions receivable of $1,171,520, proceeds from notes payable of $301,896 which were advances under
our factoring line with Sand Hill Finance LLC, proceeds from the issuance of convertible notes of $1,750,000, proceeds from the exercise of
common stock options of $180,717, proceeds from the conversion of common stock warrants of $102,460, payments on the convertible
debenture with common stock of $884,612, proceeds from the sale of restricted stock of $1,834,347, offset by repayments on notes payable of
$258,195 which were to pay down the balance on the Sand Hill Finance LLC factoring line, and payment of deferred financing costs of
$571,270. For the nine months ended June 30, 2011, net cash provided by financing activities related to proceeds received from notes payable
of $818,481 which were advances under our factoring line with Sand Hill Finance LLC, proceeds from the exercise of common stock options
of $720,148, and proceeds from the sale or restricted stock of $409,464, offset by repayments on notes payable of $596,213 which were to pay
down the balance on the Sand Hill Finance LLC factoring line.


                                                                        28
       At June 30, 2012 we had a working capital deficit of $5,462,640 and an accumulated deficit of $40,851,010. The report from our
independent registered public accounting firm on our audited financial statements for the fiscal year ended September 30, 2011 contained an
explanatory paragraph regarding doubt as to our ability to continue as a going concern as a result of our net losses in operations. While our
sales increased slightly during the Nine Months Ended June 30, 2012, our gross profit margin was approximately 34.4% and our sales were not
sufficient to pay our operating expenses. We reported a net loss of $6,522,930 for the Nine Months Ended June 30, 2012. There are no
assurances that we will report income from operations in any future periods.

       Historically, our revenues have not been sufficient to fund our operations and we have relied on capital provided through the sale of
equity securities, and various financing arrangements and loans from related parties. At June 30, 2012 we had cash on hand of $774,012. In
fiscal 2006, we entered into a receivable factoring agreement with Sand Hill Finance, LLC under which we can sell certain accounts receivable
to the lender on a full recourse basis at 80% of the face amount of the receivable up to an aggregate of $3.0 million. At June 30, 2012 we owed
Sand Hill Finance, LLC $2,016,245 under this accounts receivable line.

      We do not have any commitments for capital expenditures. We do not presently have any external sources of working capital other than
what may be available under the factoring agreement with Sand Hill Finance, LLC and loans from related parties. Our working capital needs in
future periods are dependent primarily on the rate at which we can increase our revenues while controlling our expenses and decreasing the use
of cash to fund operations. Additional capital may be needed to fund acquisitions of additional companies or assets, although we are not a party
to any pending agreements at this time and, accordingly, cannot estimate the amount of capital which may be necessary, if any, for acquisitions.

      As long as our cash flow from operations remains insufficient to completely fund operations, we will continue depleting our financial
resources and seeking additional capital through equity and/or debt financing. Under the terms of the financing agreement with Sand Hill
Finance, LLC we agreed not to incur any additional indebtedness other than trade credit in the ordinary course of business. These covenants
may limit our ability to raise capital in future periods.

       There can be no assurance that acceptable financing can be obtained on suitable terms, if at all. Our ability to continue our existing
operations and to continue growth strategy could suffer if we are unable to raise the additional funds on acceptable terms which will have the
effect of adversely affecting our ongoing operations and limiting our ability to increase our revenues and maintain profitable operations in the
future. If we are unable to secure the necessary additional working capital as needed, we may be forced to curtail some or all of our operations.

Recent Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-04, “Fair Value
Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and
International Financial Reporting Standards” (“IFRS”). The amendments in this ASU generally represent clarification of Topic 820, but also
include instances where a particular principle or requirement for measuring fair value or disclosing information about fair value measurements
has changed. This update results in common principles and requirements for measuring fair value and for disclosing information about fair
value measurements in accordance with GAAP and IFRS. The amendments are effective for interim and annual periods beginning after
December 15, 2011 and are to be applied prospectively. Early application is not permitted. We do not expect the adoption of ASU 2011-04 will
have a material impact on the Company’s Condensed Consolidated Financial Statements.

In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income” (amended
further under ASU No. 2011-12 in December 2011). This guidance eliminates the current option to report other comprehensive income and its
components in the statement of changes in equity. The guidance allows two presentation alternatives; present items in net income and other
comprehensive income in one continuous statement, referred to as the statement of comprehensive income, or in two separate, but consecutive,
statements of net income and other comprehensive income. This guidance is effective as of the beginning of a fiscal year that begins after
December 15, 2011. Early adoption is permitted, but full retrospective application is required under both sets of accounting standards. The
Company is currently evaluating which presentation alternative it will utilize.


                                                                       29
In September 2011, the FASB issued ASU No. 2011-08, “Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for Impairment”,
which simplifies how entities test goodwill for impairment. Previous guidance under Topic 350 required an entity to test goodwill for
impairment using a two-step process on at least an annual basis. First, the fair value of a reporting unit was calculated and compared to its
carrying amount, including goodwill. Second, if the fair value of a reporting unit was less than its carrying amount, the amount of impairment
loss, if any, was required to be measured. Under the amendments in this update, an entity has the option to first assess qualitative factors to
determine whether the existence of events or circumstances leads the entity to determine that it is more likely than not that its fair value is less
than its carrying amount. If after assessing the totality of events or circumstances, an entity determines that it is not more likely than not that the
fair value of the reporting unit is less than its carrying amount, then the two-step impairment test is unnecessary. If the entity concludes
otherwise, then it is required to test goodwill for impairment under the two-step process as described in Topic 350 under paragraphs
350-20-35-4 and 350-20-35-9 under Topic 350. The amendments are effective for annual and interim goodwill impairment tests performed for
fiscal years beginning after December 15, 2011 and early adoption is permitted. The Company is currently evaluating whether early adoption is
necessary.

In December 2011, the FASB issued Accounting Standards Update (ASU) No, 2011-11, Balance Sheet (Topic 210): Disclosures about
Offsetting Assets and Liabilities . The amendments in this ASU require an entity to disclose information about offsetting and related
arrangements on its financial position. This includes the effect or potential effect of rights of offset associated with an entity’s recognized assets
and recognized liabilities and require improved information about financial instruments and derivative instruments that are either (1) offset in
accordance with Section 210-20-45 or Section 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement,
irrespective of whether they are offset in accordance with Section 210-20-45 or Section 915-10-45. The amendments are effective for annual
reporting periods beginning on or after January 1, 2013 and retrospective disclosure is required for all comparative periods presented. No early
adoption is permitted. Currently, the Company does not enter into any right of offset arrangements and expects implementation to have little or
no impact.

                                                                  OUR BUSINESS

OVERVIEW

     Headquartered just outside of Washington, D.C., we manufacture and market purpose-built appliances, network and cloud-attached storage
solutions and deliver on-line cloud computing application services. Our customer base includes U.S. government agencies, enterprise
companies, and small to medium sized businesses (SMB). We have three key product offerings:

         •    Iceweb unified data network storage line of products
         •    Purpose built network/data appliances
         •    Cloud computing products/services

IceWEB unified data storage line of products

     Our high performance unified data storage solutions make it possible to operate and manage files and applications from a single device.
File-based and block-based access data are consolidated in a single storage platform which supports Fibre Channel SAN, IP-based SAN
(iSCSI), and NAS (network attached storage).

     Our unified storage system simultaneously enables storage of file data and handles the block-based I/O (input/output) of enterprise
applications. One advantage of unified storage is reduced hardware requirements. Instead of separate storage platforms, like NAS for
file-based storage and a RAID disk array for block-based storage, unified storage combines both in a single device. Alternatively, a single
device could be deployed for either file or block storage.


                                                                          30
     In addition to reduced capital expenditures for the enterprise, unified storage systems can also be simpler to manage than separate products
since our IceWEB Storage System offers one platform for file and block data of all kinds . Whether it id Microsoft Exchange, SQL Server or
Oracle databases, virtualized environments, scanned images, files, video, pictures, graphics, or voice data, we believe our products maximize
the efficiency of storage by centralizing all data on one platform secured with strong data protection capabilities.

    The all-inclusive IceWEB Storage System includes de-duplication; unlimited snapshots; thin provisioning; local or remote, real-time or
scheduled replication; capacity and utilization reporting, and integration with virtual server environments. Unified storage systems enjoy the
same level of reliability as dedicated file or block storage systems.

     We believe our product offerings have broad appeal in the enterprise and federal marketplaces, and are used as core building blocks
(enabling technologies) of business critical storage infrastructure for a diverse group of data intensive key vertical market segments such as
geospatial information systems, entertainment, security and defense, higher education, Internet service providers, managed service providers,
oil and gas, and health care. We believe our storage systems delivers levels of performance, scalability, versatility and simplicity that exceed
existing network storage alternatives. Our unified network storage offering is deployed as storage operating system software on our network
attached storage (NAS), and storage area network (SAN) hardware products. This unified network storage environment empowers companies
to:

    -    Quickly and easily deploy large complex data storage infrastructure environments
    -    Reduce administrative costs for managing their storage by making complex technical tasks far more simple to accomplish
    -    Reduce hardware and capital expenditure costs by more effectively using the storage within the system and repurposing older legacy
         hardware
    -    Protect their business critical data by leveraging our built-in data replication features
    -    Integrate with emerging server virtualization software (VMWare, Citrix Xen and Microsoft’s Hyper V) to better manage those
         solutions

     Our file management system replaces complex and performance-limited competitive products with high performance, scalable and easy to
use systems capable of handling the most data-intensive applications and environments. We believe that our solution delivers three key
benefits:

         •        Performance - which equals or exceeds all competitive products
         •        Management – which requires less expertise and provides ease of use for overburdened technical staffers
         •        Cost – our solutions typically can be deployed costing far less than those of ours competitors while delivering feature-rich
                  performance with comprehensive, yet easy-to-use management.

Competitive Landscape

     We compete with other storage vendors such as Compellent Technologies, Inc., Isilon Systems, Inc., and HP LeftHand Networks. In
addition, we find ourselves becoming an alternative in our customers’ eyes to purchasing additional equipment from large and expensive legacy
storage providers such as EMC Corporation, IBM, Network Appliance and Hitachi Data Systems.

     With the demand for data storage growing exponentially within all organizations, budgetary and common sense decision making is
creating a second tier storage marketplace where our IceWEB 3000 products are perceived as compelling data storage solutions. Based upon
our review of the market, we believe some customers are searching for alternatives from the high costs and hardware replacement upgrades
often required by the larger Tier 1 storage providers, who push expensive upgrades to satisfy to meet their billion dollar revenue growth
commitments. Instead, some customers are opting to deploy our products with versatile and feature rich capabilities.


                                                                       31
Purpose Built Network and Data Appliances

     We have been building purpose built network and data appliances for several years. Purpose built network and data appliances are devices
which provide computing resources, including processors and memory, data storage, and specific software for specific applications. In 2012 we
introduced a cloud storage appliance, a device which allows organizations and/or service providers to rapidly and easily deploy cloud based
storage services to their constituents and customers. We are aggressively pursuing other purpose built appliance opportunities and anticipate
that this strategy will begin to contribute significantly to our business ramping over the next six months Our goal is that the appliance business
segment grows to contribute approximately 20% of overall business revenue by the end of fiscal year 2013. We expect to achieve this through
our ongoing sales, marketing and research and development efforts, funded by operations.

Cloud Computing Products and Services

         Cloud Computing Services

    In December 2005, we launched IceMAIL TM a packaged software service that provides network –hosted groupware, email,
calendaring and collaboration functionality. Customers are typically organizations wishing to use Microsoft Exchange and Outlook without
having to procure, maintain and manage their own equipment and software. Online services were subsequently expanded to include
IcePORTAL TM which provides customers with a complete Intranet portal and IceSECURE TM a hosted email encryption service.

     Originally such hosted services were referred to with the acronym ’SaaS’, which stands for Software-as-a-Service. Such services, hosted
across the internet are today commonly referred to as cloud computing. We believe that the benefits of cloud computing are many. First,
adoption of an application, infrastructure, or storage environment which is available on-demand, with no capital expenditures for the user
company represents an attractive proposition from the financial perspective. Secondly, such models greatly reduce the need for highly paid
internal technical staff, freeing critical resources to work on more core business related functions. Thirdly, the application software, hardware,
and infrastructure needs of organizations are constantly growing and evolving – cloud computing allows ad-hoc allocation of resources, cost
free software upgrades, and freedom from hardware/infrastructure obsolescence.

         Cloud Storage Appliances (CSA)

     We have focused our engineering and research and development efforts on crafting our products to perform as scalable ‘building blocks’
for those companies or service providers wishing to rapidly deploy high performance infrastructure to enable delivery of cloud-based services.
In September 2009 we introduced a line of devices called “cloud storage appliances” or CSAs. A cloud storage appliance is a purpose built
storage device configured for either branch office or central site deployment which allows the housing and delivery of customer data across not
only their internal networking infrastructure, but also to make that data available to employees or business partners securely via the Internet,
often called the cloud. The CSA line has been built to address concerns within the enterprise marketplace which revolve around hesitation to
entrust corporate data to third party providers such as Amazon S3, Mozy, Nirvanix, and others. The CSA line also addresses additional
concerns about data access latency and performance.

     By implementing our CSA devices, we believe companies can gain all of the benefits of cloud computing, while mitigating the impact of
long-term contracts frequently required by vendors, and reducing the potential for security breaches. High performance data transfers are
maintained by back-hauling the data and replicating it from remote branch offices across existing wide area network links to the corporate IT
infrastructure. We believe an additional benefit derived from the deployment of private or hybrid storage clouds on the CSA products is that
companies may not be required to pay per-megabyte or per-gigabyte transfer and storage fees to third party service companies.

Customers

     Our products have been sold to customers in the U.S., Canada and Europe across a broad range of industries, including GIS; oil and gas;
state, local and federal government; and healthcare. We believe that our customers have a high level of satisfaction with our products and
services. During the year ended September 30, 2011 one customer accounted for 10% or more of our consolidated revenue.


                                                                        32
Sales and Marketing

     We sell of all of our products via full “channel-based” model. In a channel-based sales model, companies with products or services build
partnerships with systems integrators, other manufacturers, vertical companies such as ESRI and Spot Image, and distributors and leverage the
sales resources of those groups to drive sales of products/services. We believe that the value of a channel-based sales model is twofold. First it
allows us to grow total sales volume significantly while keeping sales staff, and our general and administrative expenses, low. Rather than
building a significant worldwide sales force of our own, this model allows us to build a small channel organization responsible for
identification, training and support of partner organizations to ensure their success and productivity. The second value of the channel-based
model is that partners bring their own knowledge of key accounts and have relationships already in place which compresses the sales cycle and
increases the close ratio on new business, with the goal of generating more sales for our company’s products and services.

     We continue to aggressively pursue partner agreements to increase our sales and market exposure and footprint. These partner agreements
typically take between three and six months to develop prior to materially increasing sales revenues.

Manufacturing

     Manufacturing is conducted at our headquarters in Sterling, VA. Utilizing chassis from premium manufacturers such as AIC Corporation,
Intel, SuperMicro, and others, all systems are built, burned-in, and tested at this facility by our in-house engineering and production staff. We
manufacture data appliances, modular lightweight portable enterprise servers (MLP), workgroup servers, data storage management platforms,
as well as an array of database and customized appliances. We use best-of-breed, readily available, commercial off-the-shelf products sourced
from various resellers and suppliers in our manufacturing process.

Competition

     The market for our storage is highly competitive and likely to become even more competitive in the future. Established companies have
historically dominated the storage market, including EMC, Network Appliance, Dell, Hewlett-Packard, Sun Microsystems, Hitachi Data
Systems and IBM.

    In addition, there is additional competition from smaller companies such as Compellent Technologies and Isilon. In the future, new
competitors will emerge as well as increased competition, both domestically and internationally, from other established storage companies. The
principal competitive market factors are:

•   Industry credibility
•   Product scalability, performance and reliability
•   Ease of installation and management
•   Software functionality
•   Total cost of ownership
•   Customer support
•   Market presence

     We believe that we compete effectively across all of these factors. In particular, we believe that our product architecture provides
significant competitive advantages in terms of performance, scalability, ease of management and low total cost of ownership. Historically, our
OEM partners have provided us with a significant number of reference accounts which address credibility and helps in our marketing efforts to
new customers.

    Many of the competitors have longer operating histories, better name recognition, larger customer bases and significantly greater financial,
technical, sales and marketing resources than we have. Competitors may also be able to devote greater resources to the development,
promotion, sale and support of their products. Competitors may also have more extensive customer bases and broader customer relationships
than we do, including relationships with potential our customers.


                                                                        33
Research and Development

     Research and development expenses consist primarily of personnel-related expenses, costs of prototype equipment, costs of using
contractors, allocated facility and IT overhead expenses and depreciation of equipment used in research and development activities. We
expense research and development costs as incurred. Our research and development expenses were $790,048 and $547,364, in fiscal 2011 and
fiscal 2010, respectively. Subject to the availability of sufficient capital, we intend to continue to invest significantly in our research and
development efforts, which we believe are essential to maintaining our competitive position. As a result, we expect research and development
expenses to increase in absolute dollars, although we expect these expenses to decrease as a percentage of revenue.

Intellectual Property

    Success in our technological markets depends, in part, upon our ability to obtain and maintain proprietary protection for our products,
technology and know-how. This must be accomplished without infringing the proprietary rights of others and while simultaneously preventing
others from infringing upon our proprietary rights.

     We seek to protect our proprietary positions by, among other methods, filing patent applications. Patent efforts are focused in the United
States and, when justified by cost and strategic importance, we plan to file related foreign patent applications in jurisdictions such as the
European Union and Japan. We are in the process of preparing filings for two or more provisional patents for our cloud storage appliance and
WISCSI technologies which we anticipate will happen in our fiscal fourth quarter of 2012.

    Pending patent applications relate to various software development projects and to the rapid ingestion of massive amounts of video and
other data and other network storage concepts. It is unknown if any of the patent applications will issue as patents. The patent applications
may be opposed, contested, circumvented, designed around by a third-party, or found to be invalid or unenforceable.

     Copyright law, trademarks and trade secret agreements are also used to protect and maintain proprietary positions. Our proprietary
information is protected by internal and external controls, including contractual agreements with employees, end-users and channel partners.
There is no assurance that these parties will abide by the terms of their agreements.

     Trademarks are used on some of the our products and these distinctive marks may be an important factor in marketing the products.
Inline® and Inline logo trademarks have been registered in the United States.

Our History

         We were originally formed under the laws of the State of Delaware in February 1969. For many years, we were a wholesaler of
custom one, two, three and four-color processed commercial printing, as well as disposable and durable office equipment including stock
paper, fax paper, fax and copy machines, computers, file cabinets and safes. We conducted our business throughout the United States of
America and Puerto Rico from our headquarters in New York.

          In March 1999, we changed the focus of our business and closed a transaction by which we acquired 100% of the outstanding capital
stock of North Orlando Sports Promotions, Inc., a privately held Florida corporation. From 1999 until July 2001, we operated a variety of
Internet-related services; however, we were unable to generate positive cash flow from these Internet-related businesses.

         In May 2001, we executed an Agreement and Plan of Reorganization and Stock Purchase Agreement with Disease S.I., Inc. Under the
terms of the agreement, we acquired 100% of the issued and outstanding stock of Disease S.I., Inc. in exchange for 750,000 shares of our
common stock. The transaction was accounted for as a reverse acquisition under the purchase method for business combinations. Accordingly,
the combination of the two companies was recorded as a recapitalization of Disease S.I., Inc., pursuant to which Disease S.I., Inc. was treated
as the continuing entity. Disease S.I., Inc. was a developmental stage biopharmaceutical clinical diagnostics company planning to employ a
broad array of technologies to detect, identify and quantify substances in blood or other bodily fluids and tissues. It intended to derive revenues
from patent sub-licensing fees, royalties from pharmaceutical sales, appropriate milestone payments and research and development contracts.


                                                                        34
          Following completion of the acquisition of Disease S.I., Inc., it became apparent to us that it would be in our best long-term interest
that the Internet operations be conducted apart from the biopharmaceutical clinical diagnostics operations. On July 24, 2001, we sold a former
officer and director 100% of our subsidiary North Orlando Sports Promotions, Inc., in exchange for the assumption of all liabilities related to
North Orlando Sports Promotions, Inc. and its operations estimated at approximately $112,000, and which included the forgiveness of $91,500
in accrued compensation. Included in the sale along with the capital stock of North Orlando Sports Promotions, Inc. were fixed assets, rights to
several domain names and various contractual rights and obligations.

          On November 27, 2001, we acquired 9,050,833 shares of the common stock of Healthspan Sciences, Inc., a privately held California
corporation in exchange for 5,000 shares of our common stock in a private transaction exempt from registration under the Securities Act of
1933 in reliance on Section 4(2) of that act. This agreement was rescinded on March 21, 2002. Pursuant to the rescission, Healthspan Sciences,
Inc. returned all 5,000 shares of our common stock issued in the exchange and we returned all 9,050,833 shares of Healthspan Sciences, Inc.
which we had received.

          On March 21, 2002, we executed an Agreement and Plan of Merger with IceWEB Communications, Inc., a Delaware corporation and
its security holders. Founded in 2000, IceWEB Communications, Inc. enabled interactive communications and education on the web. In June
2001, it had acquired the assets in bankruptcy of Learning Stream, Inc., a provider of streaming services. Pursuant to the agreement, each of the
22,720,500 shares of common stock of IceWEB Communications, Inc. issued and outstanding immediately prior to the merger were converted
into the right to receive 0.13375 shares of our common stock, for an aggregate of 303,888 shares of common stock. Each of the warrants to
purchase an aggregate of 680,125 shares of IceWEB Communications, Inc. common stock issued and outstanding immediately prior to the
merger were converted into the right to receive one warrant to purchase 0.13375 shares of our common stock upon exercise of said warrant.

          In June 2003, we acquired 100% of the capital stock of Interlan Communications, Inc., a privately held corporation, in exchange for
25,000 shares of our common stock. In June 2003, we also acquired 100% of the capital stock of Seven Corporation in exchange for 37,500
shares of our common stock and cash consideration of $123,000. As described later in this section, we sold Seven Corporation in February
2007.

         In October 2003, we acquired 19% of the capital stock of IceWEB 5000, Inc. of Virginia, together with substantially all of its assets
including software licenses, source code, potential patents and trademarks for a combined stock and cash value of approximately $632,000
which included the issuance of 191,381 shares of our common stock and cash consideration of $65,500.

         In May 2004, we acquired substantially all of the assets of DevElements, Inc. of Virginia, including software licenses, source code,
potential patents and trademarks, cash, hardware, and equipment. As consideration for the purchase of the assets, we paid DevElements
$100,000 and agreed to the assumption of liabilities up to an aggregate of $150,000. In exchange for the 19% interest in DevElements, we
issued to the security holders of DevElements 187,500 shares of our common stock and options to purchase 187,500 shares of common stock
exercisable at a price of $27.20 per share and expiring May 13, 2009. We issued to the security holders options to purchase 6,250 shares, which
were contingently exercisable upon the satisfaction of certain performance criteria. The performance criteria, which required contracts, task
orders and other work assignments involving billing of at least $840,000 during the six-month period ending November 13, 2004, was not met
and the options were cancelled.

          In March 2006 we acquired PatriotNet, Inc., an Internet service provider, for total consideration of $290,000 of which $190,000 was
paid in cash and $100,000 was paid through the issuance of 100,000 shares of our common stock. We granted Patriot Computer Group, Inc.,
the seller in the transaction, certain piggyback registration rights for the 100,000 shares of our common stock issued as partial consideration in
the transaction. At the time of the acquisition, the purchase price exceeded the fair value of the assets acquired by $390,600 which we treated as
goodwill for accounting purposes. From the date of acquisition through September 30, 2007 revenues from PatriotNet were approximately
$316,000 and represented approximately 6% of our consolidated revenues. On December 1, 2006 we sold PatriotNet to Leros Online, Inc., a
third party, for $150,000 in cash and the assumption of $60,000 in liabilities. At September 30, 2007 we recorded goodwill impairment of
$180,000 related to this transaction.

        On December 1, 2006 we sold 100% of the capital stock of our wholly-owned subsidiary, Integrated Power Solutions, Inc. to Mr. John
Younts, our Vice President of Integrated Power Solutions and a key employee, for the assumption of approximately $180,000 in liabilities and
the payment of $12,000 we owed him. For the fiscal year ended September 30, 2006, revenues for Integrated Power Solutions were
approximately $457,000, or approximately, 9.5%, of our total sales.


                                                                       35
         On November 15, 2006, we acquired certain of the assets of True North Solutions related to its governmental customer business for
$350,000 of which $250,000 was paid in cash and the balance was paid through the delivery of a $100,000 principal amount promissory note
secured by collateral pledge of the assets, payable immediately upon accomplishment of the novation of the GSA Schedule. Under the terms of
the agreement, we acquired the customers, forecast, contract renewals, and GSA schedule of True North Solutions. We permitted True North
Solutions to use the purchased assets until December 31, 2006 pursuant to which we acted as the seller’s subcontractor until the novation of the
GSA Schedule was complete. The novation of the GSA schedule was completed in March, 2008.

         On February 16, 2007 we sold 100% of the outstanding stock of our subsidiary, The Seven Corporation of Virginia, Inc., to PC NET
in exchange for the waiver of approximately $11,000 we owed PC NET. Under the terms of the agreement we may not engage in any staffing
services businesses as The Seven Corporation had conducted for a period of at least two years. For the fiscal year ended September 30, 2006
revenues from The Seven Corporation were $360,000 or approximately 7.5%, of our total sales.

         On December 22, 2007, we acquired 100% of the outstanding stock of Inline Corporation for $2,412,731 in cash, plus 503,356 shares
of our common stock valued at $276,846, the fair market value on the date of acquisition. The acquisition was accounted for using the purchase
method of accounting.

         On March 30, 2009, we completed the sale of IceWEB Virginia, Inc., a wholly owned subsidiary, to ABC Networks, Inc., a privately
held U.S. company. Pursuant to the terms of the transaction, ABC Networks, Inc. acquired 100% of the outstanding common stock of IceWEB,
Virginia, Inc.

EMPLOYEES

At August 17, 2012, we had 19 full-time employees, including our executive officers. None of our employees are covered by collective
bargaining agreements, and we believe our relationships with our employees to be good.

LEGAL PROCEEDINGS

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business.
However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may
harm our business.

PROPERTIES

In February 2009, we entered into a two year lease for approximately 6,978 square feet of office space in which our principal executive offices
are located for annual base rental of approximately $74,400. We are currently renting our office location on a month-to-month basis, but
anticipate renewing our lease for an additional year.

                                                               MANAGEMENT

         The following individuals serve as our executive officers and members of our Board of directors:

                      Name                                 Age     Positions
                      Harold F. Compton (1)(2)             65      Chairman
                      Robert M. Howe III                   65      Chief Executive Officer
                      Mark B. Lucky                        53      Chief Financial Officer
                      Nicholas Carosi, III                 65      Director
                      Raymond H. Pirtle (2)                71      Director
                      Jack Bush(1)                         77      Director
                      Harry E. Soyster                     77      Director

(1) Member of the Compensation Committee
(2) Member of the Audit Committee


                                                                        36
         Harold F. Compton. Mr. Compton has been a member of our board of directors since May 2005, and from May 2012 until July 23
he served as interim Chief Executive Officer following the death of Mr. John Signorello, the former Chairman and Chief Executive Officer.
Mr. Compton has been a retailer for more than 30 years. Mr. Compton joined CompUSA Inc. in 1994 as Executive Vice President-Operations,
becoming Executive Vice President and Chief Operating Officer in 1995, President of CompUSA Stores in 1996 and Chief Executive Officer
of CompUSA Inc. in 2000, a position he held until his retirement in 2004. Prior to joining CompUSA, Inc., from 1993 until 1994 he served as
President and COO of Central Electric Inc., Executive Vice President Operations and Human Resources, and Director of Stores for HomeBase
(1989 to 1993), Senior Vice President Operations and Director of Stores for Roses Discount Department Stores (1986 to 1989), and held
various management positions including Store Manager, District Manager, Regional Vice President and Zone Vice President for Zayre
Corporation from 1965 to 1986. Since 1998 Mr. Compton was a member of the board of directors of Linens ‘N Things, Inc., is currently a
member of the board of directors of Maidenform Brands, Inc. and is a member of its Compensation Committee and Corporate Governance and
Nominating Committee of the board of directors of that company. Mr. Compton also serves as Chairman of the Board of HASCO Medical, Inc.

         We believe that as a result of his years of managerial and operational experience, Mr. Compton brings to the board of directors
demonstrated management ability at senior levels. In addition, his experience as a director of a variety of companies, and his more than 30
years of experience as a retailer brings valuable insight to our board of directors. These experiences, qualifications and attributes have led to
our conclusion that Mr. Compton should be serving as a member of our board of directors in light of our business and structure.

         Robert M. Howe III. Robert M. Howe III is a technology industry veteran with over 20 years of experience in various leadership
positions. Mr. Howe was most recently with McCusker & Company, an international warranty services company, where he served as President
and Chief Operating Officer. His prior experience includes working at Dell Computer Corporation from 1992-1994 as a Senior Vice President
where he was instrumental in launching the DellWare business model, as well as creating a virtual logistics model that subsequently became
the industry standard; working at AT&T GIS from 1994-1997 (now known as NCR), where he served as VP and General Manager for their
worldwide PC business; and working at CompUSA where he held the titles of Corporate Senior Vice President and President, from 1997-2000
where he oversaw the turnaround of CompUSA’s in-house PC brand. From September 2000 to May 2006, Mr. Howe served as a consultant to
technology firms, both independently and in collaboration with the Sightline Group, in connection with go- to – market readiness. From May
2006 to February 2007, Mr. Howe served as President and Chief Operations Officer of DualCor Technologies, Inc, a technology firm that
developed a mobile handheld computer. Mr. Howe holds a BA in English from Birmingham-Southern College, and a Masters of Arts from
Auburn University.

          We believe that as a result of his years of managerial and operational experience, Mr. Howe brings a demonstrated management
ability at senior levels. These experiences, qualifications and attributes have led to our conclusion that Mr. Howe should be serving Chief
Executive Officer.

          Mark B. Lucky. Mark B. Lucky has served as our Chief Financial Officer since March 2007 and as our Chief Operating Officer
since May 2012. Since October 30, 2010 he has also served as a member of the board of directors of VOIS Inc. (OTC Markets: VOIS), an
entity in which we purchased an interest as described elsewhere herein. He has over 20 years professional experience in high growth/start-up
ventures and established companies with multi-industry experience including financial services, technology, software, real estate, biotech and
entertainment and media. Prior to joining our company, he consulted at Bearing Point on their financial restatement project. From 2004 to 2005
he was Vice President of Finance and Administration at Galt Associates, Inc., a Sterling, Virginia informatics/ technology and medical research
services company and from 2001 to 2004 he was Vice President of Finance and Administration of MindShare Design, Inc., a San Francisco,
California based internet technology company. While at both Galt Associates, Inc. and MindShare Design, Inc. Mr. Lucky was the senior
financial officer for the company, providing strategic and tactical analysis and managing day to day finance, accounting, cash management,
reporting and human resource responsibilities. During his career Mr. Lucky has also been employed by Axys Pharmaceuticals, Inc., a
NASDAQ-listed South San Francisco, California-based early stage drug discovery biotech company (acting CFO and Senior Director of
Finance), PriceWaterhouseCoopers, LLC, COMPASS Management and Leasing, Inc. (Vice President - Finance 1997 to 1998), Mindscape, Inc.
(Director of Financial Planning and Analysis 1995 to 1996), The Walt Disney Company (Manager, Operations Planning & Analysis, Manager
of Corporate Planning 1991 to 1995), and KPMG. Mr. Lucky is a member of the board of directors of VOIS Inc. and HASCO Medical, Inc.
Mr. Lucky is a CPA and received his B.A., Economics, from the University of California at Los Angeles.


                                                                         37
          Raymond Pirtle. Jr. Mr. Pirtle has been a member of our board of directors since June 2005. Mr. Pirtle is a veteran of the financial
services industry, having spent the past three decades in a variety of senior roles in corporate finance, institutional sales, investment banking,
and equity research. From 1966 until 1989 he was employed by J.C. Bradford & Co., a large regional investment banking and brokerage,
departing as a general partner. From 1989 until 2001 he was a Director and co-head of institutional sales of Equitable Securities Corp., a
banking and institutional brokerage firm later known as SunTrust Equitable. In 2001 he was one of the founding partners of Avondale Partners,
LLC, an institutional equity research and investment banking firm focusing on small companies generally with a market cap in the range of
$200 million to $2 billion. In March 2005 Mr. Pirtle founded Clairidge Company, LLC., a consulting firm that represents micro-cap to
small-cap companies with a public equity valuation under $200 million or larger companies that are seeking to attract broad attention from
institutional portfolio managers, research analysts or investment bankers. Since 1985 Mr. Pirtle has been serving on the board of both public
and private companies. He currently serves on the board of Premier Global Services, Inc. (NYSE: PGI), a provider of business communications
services and business process solutions that enable enterprise customers to automate and simplify components of their critical business
processes and to communicate more effectively with their constituents.

          Mr. Pirtle is a veteran of the financial services industry, having spent the past three decades in a variety of senior roles in corporate
finance, institutional sales, investment banking, and equity research. These experiences, qualifications and attributes have led to our conclusion
that Mr. Pirtle should be serving as a member of our board of directors in light of our business and structure.

         Jack Bush. Mr. Bush has been a member of our board of directors since August 2005. Mr. Bush has served as the President of
Raintree Partners, Inc., a management consulting company, since September 1995. He is also currently Chairman and Director of
IdeaForest.com (Joann.com), and Vice Chairman and Director of FPE Corporation (Framed Picture Enterprises). From 1995 to 1999 he served
as Chairman of Aaron Brothers Holding Company and of Carolina Art & Frame Co. He was a founder, Chief Concept Officer and Director of
Artistree Art, Frame & Design Company. During this time he was also a director of Cyberplay, New York Coffee & Bagels, Bradlees Stores,
Stage Stores, Telequip and Jumbo Sports Company. He served on the board of Bradlees during a successful reorganization and served as
special assistant to the board of Stage Stores during a successful reorganization. From 1997 to 1999 he served as Chairman, CEO and President
of Jumbo Sports Co. From 1991 to August 1995, he was President and Director of Michaels Stores, Inc. and was Chairman of Michaels of
Canada. The Company grew from 136 to 530 stores and became the largest arts and crafts retailer in the world. Upon leaving the
NASDAQ-listed company, sales reached $1.5 billion and had 22,000 associates. From 1990 to 1991 he served as Executive Vice President,
Director of Operations and Stores for Ames Department Stores. From 1985 to 1990 Mr. Bush was President and Director of Roses Stores, a
NASDAQ-listed company. During his tenure the Company grew to 226 stores with $1.6 billion in sales and 25,000 associates. From 1980 to
1985 He served as Vice President of Zayre Corporation, an NYSE-listed company responsible for 105 stores and $750 million in sales. From
1958 to 1980 he served in a variety of positions with J.C. Penney Company, an NYSE-listed company. Mr. Bush was a U.S. Air Force Reserve
officer and holds a Bachelor of Science from the University of Missouri.

         We believe that Mr. Bush’s extensive senior management, operational, and board experience bring valuable knowledge to our board
of directors and that these experiences, qualifications and attributes have led to our conclusion that Mr. Bush should be serving as a member of
our board of directors in light of our business and structure.

         Harry E. Soyster. General Soyster has been a member of our board of directors since March 2009. General Soyster served as
Director, Defense Intelligence Agency during Desert Shield/Storm. He also served as Deputy Assistant Chief of Staff for Intelligence,
Department of the Army; Commanding General, U.S. Army Intelligence and Security Command; and in the Joint Reconnaissance Center, Joint
Chiefs of Staff. In Vietnam, he was a field artillery battalion operations officer, and was twice decorated for valor and wounded in action. Upon
retirement, General Soyster was Vice President for International Operations with Military Professional Resources Incorporated where he
helped pioneer the concept of providing retired military expertise to support emerging democracies in Eastern Europe and Africa. In 2006, he
served as Special Assistant to the Secretary of the Army for World War II 60 th Anniversary Commemorations. Currently, he serves as
consultant to numerous corporations and participates in studies by the Center for Strategic and International Studies and the National Institute
for Public Policy. In 1957, General Soyster graduated from the United States Military Academy with a Bachelor of Science degree in
Engineering. He also holds a Masters of Science degree in Chemistry from Pennsylvania State University in Chemistry and a Masters of
Science degree in Management from the University of Southern California. His military education includes completion of the Field Artillery
School, Basic and Advanced Courses; the U.S. Army Command and General Staff College; and the National War College. General Soyster has
an active TS/SCI (Top Secret/Sensitive Compartmented Information) clearance.


                                                                        38
         General Soyster provides our board with extensive knowledge, experience, and relationships with agencies in the federal government.
He has significant organizational, operational, and managerial experience and we believe he brings valuable insight to growing our company
and assist us in meeting our business objectives. We believe that these experiences, qualifications and attributes have led to our conclusion that
General Soyster should be serving as a member of our board of directors in light of our business and structure.

         Nick Carosi, III. Mr. Carosi has been a member of our board of directors since May, 2012. He has served as President and CEO of
Arban & Carosi Inc., one of the largest manufacturers of architectural precast concrete serving the Mid-Atlantic area, since 1990. He currently
serves as a board member of INOVA Health Systems, with which he has been associated for over 20 years. He began his career with the Arban
& Carosi Inc. in 1969, and was instrumental in overseeing its growth into the preeminent manufacturers of architectural precast concrete in
North America . Mr. Carosi is a former board member, and President of the Prince William County Chamber of Commerce, has served on the
advisory board of Sovran Bank, was a member of the board of Piedmont Federal Savings and Loan, and also served on the board of Potomac
Hospital. During that time he has served as a board member, chairman of the finance committee, chairman of the governance committee,
chairman of the investment committee, and is currently the vice chair of the board. He is also currently on the board of Marymount University
of Arlington, Virginia, and Bellarmine University of Louisville, Kentucky, his alma mater. In addition, Mr. Carosi was instrumental in bringing
what is now known as the Potomac Nationals to Prince William County, Virginia, having served as their Treasurer for four years. He is also a
former partner of TSI Windows of Maryland.

         There are no family relationships between any of the executive officers and directors. Directors are elected at our annual meeting of
security holders and hold office until the next annual meeting of security holders or until his or her resignation, removal, or death.

Committees of the Board of directors

         Our board of directors has created both an Audit Committee and a Compensation Committee. We do not have a Nominating
Committee or any committee performing a similar function. The functions that such a committee would undertake are being undertaken by the
entire board as a whole. We do not have a policy regarding the consideration of any director candidates which may be recommended by our
security holders, including the minimum qualifications for director candidates, nor has our board of directors established a process for
identifying and evaluating director nominees. We have not adopted a policy regarding the handling of any potential recommendation of director
candidates by our security holders, including the procedures to be followed. Our board has not considered or adopted any of these policies as
we have never received a recommendation from any stockholder for any candidate to serve on our board of directors or any inquiry as to what
the procedures may be if a stockholder wished to make such a recommendation. Since 2009 the board has been developing a nominating and
approval process and policy to guide the handling of potential recommendations of board candidates. While there have been no nominations of
additional directors proposed, in the event such a proposal is made, all members of our board will participate in the consideration of director
nominees.

         Audit Committee . The Audit Committee of our board of directors was formed to assist the board of directors in fulfilling its
oversight responsibilities for the integrity of our consolidated financial statements, compliance with legal and regulatory requirements, the
independent registered public accounting firm’s qualifications and independence, and the performance of our internal audit function and
independent auditors. The Audit Committee will also prepare the report that SEC rules require be included in our annual proxy statement. The
Audit Committee has adopted a charter which sets forth the parameters of its authority The Audit Committee Charter provides that the Audit
Committee is empowered to:


                                                                        39
    •    Appoint, compensate, and oversee the work of the independent registered public accounting firm employed by our company to
         conduct the annual audit. This firm will report directly to the audit committee;
    •    Resolve any disagreements between management and the auditor regarding financial reporting;
    •    Pre-approve all auditing and permitted non-audit services performed by our external audit firm;
    •    Retain independent counsel, accountants, or others to advise the committee or assist in the conduct of an investigation;
    •    Seek any information it requires from employees - all of whom are directed to cooperate with the committee’s requests - or external
         parties;
    •    Meet with our officers, external auditors, or outside counsel, as necessary; and
    •    The committee may delegate authority to subcommittees, including the authority to pre-approve all auditing and permitted non-audit
         services, provided that such decisions are presented to the full committee at its next scheduled meeting.

         Each Audit Committee member is required to:

    •    satisfy the independence requirements of Section 10A(m)(3) of the Securities Exchange Act of 1934, and all rules and regulations
         promulgated by the SEC as well as the rules imposed by the stock exchange or other marketplace on which our securities may be
         listed from time to time, and
    •    meet the definitions of “non-employee director” for purposes of SEC Rule 16b-3 and “outside director” for purposes of Section
         162(m) of the Internal Revenue Code.

         Each committee member is required to be financially literate and at least one member is to be designated as the “financial expert,” as
defined by applicable legislation and regulation. No committee member is permitted to simultaneously serve on the audit committees of more
than two other public companies. Mr. Pirtle is considered an “audit committee financial expert” under the definition under Item 407 of
Regulation S-K. As we expand our Board of directors with additional independent directors the number of directors serving on the Audit
Committee will also increase.

         A copy of the Audit Committee Charter is available on our website at www.iceweb.com under the “Investor Relations” tab.

Compensation Committee . The Compensation Committee was appointed by the board to discharge the board’s responsibilities relating to:

    •    compensation of our executives,
    •    equity-based compensation plans, including, without limitation, stock option and restricted stock plans, in which officers or
         employees may participate, and
    •    arrangements with executive officers relating to their employment relationships with our company, including employment
         agreements, severance agreements, supplemental pension or savings arrangements, change in control agreements and restrictive
         covenants.

          The Compensation Committee has adopted a charter. The Compensation Committee charter provides that the Compensation
Committee has overall responsibility for approving and evaluating executive officer compensation plans, policies and programs of our
company, as well as all equity-based compensation plans and policies. In addition, the Compensation Committee oversees, reviews and
approves all of our ERISA and other employee benefit plans which we may establish from time to time. The Compensation Committee is also
responsible for producing an annual report on executive compensation for inclusion in our proxy statement and assisting in the preparation of
certain information to be included in other periodic reports filed with the SEC.

         Each Compensation Committee member is required to:

    •    satisfy the independence requirements of Section 10A(m)(3) of the Securities Exchange Act of 1934, and all rules and regulations
         promulgated by the SEC as well as the rules imposed by the stock exchange or other marketplace on which our securities may be
         listed from time to time, and
    •    meet the definitions of “non-employee director” for purposes of SEC Rule 16b-3 and “outside director” for purposes of Section
         162(m) of the Internal Revenue Code.


                                                                       40
        Pursuant to our Compensation Committee Charter, the Compensation Committee is charged with evaluating and recommending for
approval by the board of directors the compensation of our executive officers. In addition, the Compensation Committee also evaluates and
makes recommendations to the entire board of directors regarding grants of options which may be made as director compensation. The
Compensation Committee does not delegate these authorities to any other persons nor does it use the services of any compensation consultants.

        Messrs. Compton and Bush are the members of our Compensation Committee. As we expand our board of directors with additional
independent directors the number of directors serving on the Compensation Committee will also increase. A copy of the Compensation
Committee Charter is available on our website at www.iceweb.com under the “Investor Relations” tab.

Code of Ethics

        In May 2005, we adopted a Code of Business Conduct and Ethics applicable to our Chief Executive Officer, principal financial and
accounting officers and persons performing similar functions. A Code of Business Conduct and Ethics is a written standard designed to deter
wrongdoing and to promote:

      •     honest and ethical conduct,
      •     full, fair, accurate, timely and understandable disclosure in regulatory filings and public statements,
      •     compliance with applicable laws, rules and regulations,
      •     the prompt reporting violation of the code, and
      •     accountability for adherence to the Code.

          A copy of our Code of Business Conduct and Ethics is filed as an exhibit to our annual report for fiscal 2011. We will provide a copy,
without charge, to any person desiring a copy of the Code of Business Conduct and Ethics, by written request to us at our principal offices to
the attention of Corporate Secretary.

                                                            EXECUTIVE COMPENSATION

         The following table summarizes all compensation recorded by us in each of the last two completed fiscal years for our principal
executive officer, each other executive officer serving as such whose annual compensation exceeded $100,000 and up to two additional
individuals for whom disclosure would have been made in this table but for the fact that the individual was not serving as an executive officer
of our company at September 30, 2011. The value attributable to any option awards is computed in accordance with accordance with ASC
Topic 718, “Compensation – Stock Compensation, “Share-Based Payments. The assumptions made in the valuations of the option awards are
included in Note 12 of the Notes to our Financial Statements for fiscal 2011 appearing later in this prospectus.

                                                        SUMMARY COMPENSATION TABLE

                                                                                                          Nonqualified
                                                                                      Non-Equity            Deferred             All
                                                             Stock      Option       Incentive Plan       Compensation          Other
         Name and                  Salary       Bonus       Awards      Awards       Compensation           Earnings         Compensation     Total
     principal position   Year       ($)         ($)          ($)         ($)             ($)                 ($)                ($)           ($)
            (a)            (b)       (c)         (d)          (e)         (f)             (g)                 (h)                (i)           (j)

John Signorello (1)       2011       205,889            —      76,192           —                     —                  —           34,038    316,119
                          2010       239,559            —     430,000           —                     —                  —            8,914    678,476

Mark B. Lucky (2)         2011       156,417            —      76,192           —                     —                  —           10,041    242,650
                          2010       201,424            —     197,800           —                     —                  —            8,923    408,147


(1)      Mr. Signorello is our former Chief Executive Officer. All other compensation in fiscal 2011 includes $10,038 which represents the
value of health insurance premiums and includes $24,000 which represents the value of life insurance premiums we paid for Mr. Signorello. In
fiscal 2011, we granted him 468,727 shares of our restricted common stock, valued at $76,192. All other compensation in fiscal 2010 includes
$8,914 which represents the value of health insurance premiums we pay for Mr. Signorello. In fiscal 2010, we granted him 5,000,000 shares of
our restricted common stock, valued at $430,000.


                                                                           41
(2)     All other compensation in fiscal 2011 and 2010 represents the value of health insurance premiums we pay for Mr. Lucky. In fiscal
2011, we granted him 468,727 shares of our restricted common stock, valued at $76,192. In fiscal 2010, we granted him 2,300,000 shares of
our restricted common stock, valued at $197,800.

How Mr. Signorello’s compensation was determined

Mr. Signorello served as our CEO from March 2000 until his death in May, 2012. He was not a party to an employment agreement with our
company. His compensation was determined by the Compensation Committee of our board of directors. The Compensation Committee
considered a number of factors in determining Mr. Signorello’s compensation including the scope of his duties and responsibilities to our
company and the time he devoted to our business. The Compensation Committee did not consult with any experts or other third parties in
fixing the amount of Mr. Signorello’s compensation. During fiscal 2011 Mr. Signorello’s compensation package included a base salary of
$250,000 and company provided health care benefits.

How Mr. Lucky’s compensation is determined

Mr. Lucky, who has served as our CFO since March 2007, is not a party to an employment agreement with our company. His compensation is
determined by the Compensation Committee of our board of directors. The Compensation Committee considered a number of factors in
determining Mr. Lucky’s compensation including the scope of his duties and responsibilities to our company and the time he devotes to our
business. The Compensation Committee did not consult with any experts or other third parties in fixing the amount of Mr. Lucky’s
compensation. During fiscal 2011 Mr. Lucky’s compensation package included a base salary of $200,000 and company provided health care
benefits. Mr. Lucky did not receive any stock option grants during this fiscal year. The amount of compensation payable to Mr. Lucky can be
increased at any time upon the determination of the Compensation Committee of our board of directors.

Director Compensation

We have not established standard compensation arrangements for our directors and the compensation payable to each individual for their
service on our Board is determined from time to time by our board of directors based upon the amount of time expended by each of the
directors on our behalf. The following table provides information concerning the compensation of our directors for their services as members of
our board of directors for the fiscal year ended September 30, 2011.

                        Fees                                          Non-Equity          Non-Qualified
                      Earned                                           Incentive            Deferred
                      or Paid          Stock          Option             Plan             Compensation           All Other
                      in Cash         Awards          Awards         Compensation           Earnings           Compensation          Total
        Name             ($)            ($)            ($)                ($)                 ($)                    ($)              ($)
Harold Compton                  —              —               —                    —                     —                   —              —
Jack Bush                       —              —               —                    —                     —                   —              —
John R. Signorello              —              —               —                    —                     —                   —              —
Raymond Pirtle                  —              —               —                    —                     —                   —              —
Harry E. Soyster                —              —               —                    —                     —                   —              —
Joseph Druzak                   —              —               —                    —                     —                   —              —

Outstanding Equity Awards at Fiscal Year-End

         The following table provides information concerning unexercised options, stock that has not vested and equity incentive plan awards
for each named executive officer outstanding as of September 30, 2011:


                                                                      42
                                       OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

                                         OPTION AWARDS                                                      STOCK AWARDS
                                                                                                                                        Equity
                                                                                                                       Equity         Incentive
                                                                                                                      Incentive          Plan
                                                                                                         Market         Plan           Awards:
                                                                                               Number    Value        Awards:          Market
                                                    Equity                                        of        of        Number          or Payout
                                                   Incentive                                   Shares    Shares           of           Value of
                                                     Plan                                         or       or         Unearned        Unearned
                                                   Awards:                                      Units     Units        Shares,         Shares,
               Number of        Number of         Number of                                       of        of         Units or        Units or
                Securities       Securities        Securities                                   Stock    Stock          Other           Other
               Underlying       Underlying        Underlying                                    That      That         Rights           Rights
               Unexercised      Unexercised       Unexercised        Option                     Have      Have          That             That
                 Options          Options          Unearned          Exercise     Option         Not       Not        Have Not        Have Not
                   (#)              (#)             Options           Price      Expiration    Vested    Vested        Vested           Vested
    Name       Exercisable     Unexercisable          (#)              ($)         Date          (#)       ($)           (#)              (#)
     (a)           (b)              (c)               (d)              (e)          (f)          (g)       (h)           (i)              (j)

John R.
Signorello          100,000                —                     $        0.70    04/29/2012
                    500,000                —                     $        0.58    05/06/2015
                    250,000                —                     $        0.60    09/06/2012
                    250,000                —                     $        0.10    03/09/2014


Mark Lucky          100,000                —                     $        0.58    05/06/2012
                    150,000                —                     $        0.55    06/14/2012
                    150,000                —                     $        0.60    09/06/2012
                     29,167            20,833                    $       0.001    03/18/2013

                                                           STOCK OPTION PLAN

         In August 2000, our Board of directors adopted our 2000 Management and Director Equity Incentive and Compensation Plan (the
“Plan”). The Plan was approved by our security holders in August 2001. As amended in May 2006, June, 2007, February, 2010, and October,
2010, we have reserved an aggregate of 60,000,000 shares of common stock for issuance under the Plan. At December 1, 2011 we have granted
options to purchase 4,104,487 shares of our common stock under the Plan. Our Board of directors (or at their discretion a committee of our
Board members) administers the Plan including, without limitation, the selection of recipients of awards under the Plan, the granting of stock
options, restricted shares or performance shares, the determination of the terms and conditions of any such awards, the interpretation of the Plan
and any other action they deem appropriate in connection with the administration of the Plan.

         The purpose of the plan is to advance our interests and those of our security holders by providing a means of attracting and retaining
key employees, directors and consultants. In order to serve this purpose, we believe the Plan encourages and enables key employees, directors
and consultants to participate in our future prosperity and growth by providing them with incentives and compensation based on our
performance, development and financial success. Participants in the Plan may include our officers, directors, other key employees and
consultants who have responsibilities affecting our management, development or financial success.

          Awards may be made under the Plan in the form of Plan options, shares of our common stock subject to a vesting schedule based upon
certain performance objectives and shares subject to a vesting schedule based on the recipient’s continued employment. Plan options may either
be options qualifying as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended or options that do not so
qualify. Any incentive stock option granted under our Plan must provide for an exercise price of not less than 100% of the fair market value of
the underlying shares on the date of such grant, but the exercise price of any incentive option granted to an eligible employee owning more than
10% of our common stock must be at least 110% of such fair market value as determined on the date of the grant. Only persons who are our
officers or other key employees are eligible to receive incentive stock options and performance share grants. Any non-qualified stock option
granted under our Plan must provide for an exercise price of not less than 50% of the fair market value of the underlying shares on the date of
such grant.

         The term of each Plan option and the manner in which it may be exercised is determined by the Board of directors, provided that no
Plan option may be exercisable more than three years after the date of its grant and, in the case of an incentive option granted to an eligible
employee owning more than 10% of our common stock, no more than five years after the date of the grant. The exercise price of the stock
options may be paid in either:
43
    •    cash, or
    •    delivery of unrestricted shares of our common stock having a fair market value on the date of delivery equal to the exercise price, or
    •    surrender of shares of our common stock subject to the stock option which has a fair market value equal to the total exercise price at
         the time of exercise, or
    •    a combination of the foregoing methods.

          All Plan options are nonassignable and nontransferable, except by will or by the laws of descent and distribution and, during the
lifetime of the optionee, may be exercised only by such optionee. At the discretion of the Board of directors, it may approve the irrevocable
transfer, without payment, of non-qualified options to the option holder’s spouse, children, grandchildren, nieces or nephews, or to the trustee
of a trust for the principal benefit of one or more such persons, or to a partnership whose partners are one or more of such persons. If an
optionee’s employment is terminated for any reason, other than due to his or her death, disability or termination for cause, or if an optionee is
not our employee but is a member of our Board of directors and his or her service as a director is terminated for any reason, other than due to
his or her death or disability, the Plan option granted may be exercised on the earlier of the expiration date or 90 days following the date of
termination. If the optionee dies during the term of his or her employment, the Plan option granted to him or her shall lapse to the extent
unexercised on the earlier of the expiration date of the Plan option or the date one year following the date of the optionee’s death. If the
optionee’s employment, membership on the Board of directors or engagement as a consultant terminates by reason of the optionee’s retirement,
then the Plan option granted may be exercised until the earlier of 90 days following the date of termination or the expiration date. If the
optionee is permanently and totally disabled within the meaning of Section 22(c)(3) of the Internal Revenue Code, the Plan option granted to
him or her lapses to the extent unexercised on the earlier of the expiration date of the option or one year following the date of such disability.

          At the time of the restricted share grant, the Board of directors may determine the vesting schedule of such shares and that after
vesting, such shares may be further restricted as to transferability or be subject to repurchase by us or forfeiture upon the occurrence of certain
events. Awards of restricted shares must be accepted by the participant within 30 days of the grant.

          At the time of the award of performance shares, the Board of directors shall establish a range of performance goals to be achieved
during the performance period, including, without limitation, earnings, return on capital, or any performance goal approved by our security
holders in accordance with Section 162(m) of the Internal Revenue Code. Attainment of the highest performance goal for the performance
period will earn 100% of the performance shares awarded for the performance period; failure to attain the lowest performance goal will result
in the participant earning no performance shares. Attainment of the performance goals will be calculated from our financial statements,
excluding changes in federal income tax rates and the effect of non-recurring and extraordinary items. The performance goals may vary for
different performance periods and need not be the same for each participant receiving an award during a performance period.

          If the participant’s employment by us, membership on our Board of directors, or engagement by us as a consultant is terminated
before the end of any performance period, or upon the participant’s death, retirement or disability, the Board of directors, taking into
consideration the performance of such participant and our performance over the performance period, may authorize the issuance to the
participant or his or her legal representative or designated beneficiary all or a portion of the performance shares which would have been issued
to him or her had the participant’s employment, Board membership or consulting engagement continued to the end of the performance period.
If the participant’s employment, Board membership or consulting engagement terminates before the end of the performance period for any
other reason, all performance shares are forfeited.

         Notwithstanding the foregoing, but subject to any stockholder approval or other requirements of Section 162(m) of the Internal
Revenue Code, the Board of directors in its discretion and as determined at the time of award of the performance shares, may provide the
participant with the option of receiving cash in lieu of the performance shares in an amount determined at the time of award including, without
limitation, by one or more of the following methods:

    •    the fair market value of the number of shares subject to the performance shares agreement on the date of award, or
    •    part or all of any increase in the fair market value since such date, or
    •    part or all of any dividends paid or payable on the number of shares subject to the performance share agreement, or



                                                                         44
    •       any other amounts which in the Board’s sole discretion are reasonably related to the achievement of the applicable performance goals,
            or
    •       any combination of the foregoing.

         The purchase price for restricted shares or performance shares granted under the Plan shall be set by the Board of directors but may
not be less than par value. Payment of the purchase price for the restricted shares or performance share may be made in either,

    •       cash, or
    •       by delivery of unrestricted shares of our common stock having a fair
    •       market value on the date of such delivery equal to the total
    •       purchase price, or
    •       a combination of either of these methods.

          The restricted stock awards, performance stock awards and stock options are subject to accelerated vesting in the event of our change
of control. We may, at our option, terminate all unexercised stock options 30 days after a change in control and pay to the participant holding
these unexercised options cash in an amount equal to the difference between fair market value and the exercise price of the stock option. If the
fair market value is less than the exercise price, we may terminate the options without payment to the holder. The per share purchase price of
shares subject to Plan options granted under the Plan or related to performance share awards or restricted share awards may be adjusted in the
event of certain changes in our capitalization, but any such adjustment shall not change the total purchase price payable upon the exercise in
full of such option or award. No participant in our Plan has any rights as a stockholder until the shares subject to the Plan options or stock
awards have been duly issued and delivered to him or her.

         We have an option to purchase any shares of our common stock which have been issued to Plan participants pursuant to restricted
stock awards, performance stock awards or stock options if the participant ceases to be our employee, a member of our Board of directors or a
consultant to us for any reason. We must exercise our repurchase right at the time of termination. The purchase price for any shares we
repurchase will be equal to the fair market value of the our total security holders’ equity divided by the total outstanding shares of our common
stock on the last day of that calendar month, calculated on a fully-diluted basis. If we exercise our repurchase right, we much close the
transaction within 20 days from the termination date. At closing, we are entitled to delivery of a one-year promissory note as payment for the
purchase price or, at our option, we may pay same in cash at closing.

         We also have a right of first refusal to meet the offer if the holder of any shares of our common stock awarded or issued pursuant to
our Plan desires to sell such shares to a third party.

            The Board of directors may amend, suspend or terminate our Plan at any time, except that no amendment shall be made which:

    •       affects outstanding Plan options or any exercise right thereunder, or
    •       extends the term of any Plan option beyond 10 years, or
    •       extends the termination date of the Plan.

         Unless the Plan shall be earlier suspended or terminated, the Plan shall terminate 10 years from the date of the Plan’s adoption by our
security holders. Any such termination of our Plan shall not affect the validity of any Plan options previously granted there under.

LIMITATION ON LIABILITY

        Under our certificate of incorporation, our directors are not liable for monetary damages for breach of fiduciary duty, except in
connection with:

        •      breach of the director’s duty of loyalty to us or our security holders;
        •      acts or omissions not in good faith or which involve intentional misconduct, fraud or a knowing violation of law;


                                                                          45
    •    a transaction from which our director received an improper benefit; or

    •    an act or omission for which the liability of a director is expressly provided under Delaware law.

In addition, our bylaws provides that we must indemnify our officers and directors to the fullest extent permitted by Delaware law for all
expenses incurred in the settlement of any actions against such persons in connection with their having served as officers or directors.

          Insofar as the limitation of, or indemnification for, liabilities arising under the Securities Act of 1933 may be permitted to directors,
officers, or persons controlling us pursuant to the foregoing, or otherwise, we have been advised that, in the opinion of the Securities and
Exchange Commission, such limitation or indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable.

                                     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

From time to time we have borrowed operating funds from Mr. John Signorello, our former Chief Executive Officer, for working capital. The
advances were payable upon demand and were interest free. During fiscal 2010 Mr. Signorello advanced $66,300 to us, and we repaid
$66,300. The highest amount that we owed Mr. Signorello during fiscal 2010 was $25,000. At each of the last four fiscal year ends, 2008,
2009, 2010, and 2011, the amount owed to Mr. Signorello was $0. As of July 7, 2012, the amount owed to Mr. Signorello or to his estate was
$0.

While we do not have any policies or procedures for the review, approval or ratification of any related party transactions and no review or
ratification of any of the foregoing related party truncations by our board has occurred.

Director Independence

        Messrs. Carosi, Pirtle and Bush and General Soyster are considered independent within The NASDAQ Stock Market’s director
independence standards pursuant to Marketplace Rule 5605.

                                                     PRINCIPAL SECURITY HOLDERS

At August 15, 2012, there were 193,417,389 shares of our common stock issued and outstanding. Our common stock is the only outstanding
class of our voting securities. The following table sets forth, as of August 15, 2012, information known to us relating to the beneficial
ownership of these shares by:

    •    each person who is the beneficial owner of more than 5% of the outstanding shares of common stock;

    •    each director;

    •    each named executive officer; and

    •    all named executive officers and directors as a group.

Unless otherwise indicated, the address of each beneficial owner in the table set forth below is care of 22900 Shaw Road, Suite 111, Sterling,
Virginia 20166.

We believe that all persons named in the table have sole voting and investment power with respect to all shares of beneficially owned by them.
Under securities laws, a person is considered to be the beneficial owner of securities he owns and that can be acquired by him within 60 days
from August 15, 2012 upon the exercise of options, warrants, convertible securities or other understandings. We determine a beneficial owner’s
percentage ownership by assuming that options, warrants or convertible securities that are held by him, but not those held by any other person
and which are exercisable within 60 days of August 15, 2012, have been exercised or converted. Unless otherwise noted, the address of each of
these principal security holders is our principal executive offices.


                                                                         46
                                                                                                        Amount and
                                                                                                         Nature of
                                                      Name of                                            Beneficial      Percentage
                                                  Beneficial Owner                                      Ownership         of Class
       Hal Compton (1)                                                                                     2,241,333               1.13 %
       Raymond H. Pirtle (2)                                                                                 159,167               0.08 %
       Nicholas Carosi III (3)                                                                             9,591,666               4.86 %
       Mark B. Lucky (4)                                                                                   6,364,567               3.22 %
       Ed Soyster (5)                                                                                         59,000               0.03 %
       Jack Bush (6)                                                                                       1,544,167               0.78 %
       All executive officers and as a group (six persons) (1)(2),(3),(4),(5),(6)                         19,959,899             10.11 %
       Estate of John R. Signorello (7)                                                                   16,534,785               8.36 %

(1)      The number of shares beneficially owned by Mr. Compton includes options to purchase 150,000 shares of our common stock at an
exercise price of $0.60 per share, options to purchase 238,333 shares of our common stock at an exercise price of $0.001 per share, and options
to purchase 250,000 shares of our common stock at an exercise price of $0.10 per share.

(2)      The number of shares beneficially owned by Mr. Pirtle includes options to purchase 150,000 shares of our common stock at an
exercise price of $0.60 per share, and options to purchase 9,167 shares of our common stock at an exercise price of $0.001 per share.

(3)      The number of shares beneficially owned by Mr. Carosi includes warrants to purchase 4,045,833 shares of our common stock at an
exercise price of $0.15 per share.

(4)      The number of shares beneficially owned by Mr. Lucky includes options to purchase 150,000 shares of our common stock at an
exercise price of $0.60 per share, and options to purchase 44,167 shares of our common stock at an exercise price of $0.001 per share.

(5)      The number of shares beneficially owned by Mr. Soyster includes options to purchase 25,000 shares of our common stock at an
exercise price of $0.37 per share, and options to purchase 34,000 shares of our common stock at an exercise price of $0.001 per share.

(6)      The number of shares beneficially owned by Mr. Bush includes options to purchase 150,000 shares of our common stock at an
exercise price of $0.60 per share, options to purchase 144,167 shares of our common stock at an exercise price of $0.001 per share, and options
to purchase 250,000 shares of our common stock at an exercise price of $0.10 per share.

(7)      The number of shares beneficially owned by Mr. Signorello’s estate includes options to purchase 250,000 shares of our common stock
at an exercise price of $0.60 per share, and options to purchase 250,000 shares of our common stock at an exercise price of $0.10 per share.
The number of shares beneficially owned by Mr. Signorello excludes 626,667 shares of our common stock issuable upon the conversion of
626,667 shares of Series B convertible preferred stock. Under the designations, rights and preferences of such security, the Series B convertible
preferred stock is not convertible by the holder if such conversion would result in the holder becoming the beneficial owner of in excess of
4.99% of our common stock. This provision may be waived or amended only with the consent of the holders of all of the Series B convertible
preferred stock and the consent of the holders of a majority of our outstanding shares of common stock who are not our affiliates.

Securities Authorized For Issuance Under Equity Compensation Plans

The following table sets forth securities authorized for issuance under equity compensation plans, including individual compensation
arrangements, by us under our 2000 Management and Director Equity Incentive and Compensation Plan and any compensation plans not
previously approved by our security holders as of September 30, 2011.

                                                                                                                             Number of
                                                                                                                              securities
                                                                                                                             remaining
                                                                                       Number of        Weighted            available for
                                                                                    securities to be     average          future issuance
                                                                                      issued upon        exercise           under equity
                                                                                       exercise of       price of          compensation
                                                                                      outstanding      outstanding        plans (excluding
                                                                                         options,        options,             securities
                                                                                     warrants and      warrants and          reflected in
                                                                                        rights (a)       rights (b         column (a)) (c)
Plan category
Plans approved by our security holders:
2000 Management and Director Equity Incentive and Compensation
Plan                                                                  2,269,417   $   0.375     -

Plans not approved by security holders:
None                                                                         0          n/a   n/a


                                                                 47
A description of each of these plans is contained earlier in this prospectus. Executive Compensation – Stock Option Plan.

                                                             USE OF PROCEEDS

We will not receive any proceeds from the resale of shares of our common stock by the selling security holders covered by this prospectus;
however, we will receive proceeds from cash payments made in connection with the exercise of warrants held by selling security holders that
are covered by this prospectus. We expect to use the proceeds received from the exercise of the warrants, if any, for working capital and
general corporate purposes.

                                                        SELLING SECURITY HOLDERS

We are registering for resale shares of our common stock. We are registering the shares to permit the selling security holders and their
pledgees, donees, transferees and other successors-in-interest that receive their shares from a selling stockholder as a gift, partnership
distribution or other non-sale related transfer after the date of this prospectus to resell the shares when and as they deem appropriate in the
manner described in the “Plan of Distribution.” The information included below is based on information that has been provided to us by or on
behalf of the selling security holders. The information assumes all of the shares covered hereby are sold or otherwise disposed of by the Selling
Security holders pursuant to this prospectus. However, we do not know whether the selling security holders will in fact sell or otherwise
dispose of the shares of common stock listed next to their names below.

The following table sets forth:

       •    the name of the selling security holders,

       •    the number of shares of our common stock that the selling security holders beneficially owned prior to the offering for resale of the
            shares under this prospectus,

       •    the maximum number of shares of our common stock that may be offered for resale for the account of the selling security holders
            under this prospectus, and

       •    the number and percentage of shares of our common stock to be beneficially owned by the selling security holders after the offering
            of the shares (assuming all of the offered shares are sold by the selling security holders).


                                                                       48
      Shares of Common Stock Beneficially
           Owned After this Offering
                                                   Number of
                                                  Shares Owned                                    Number of Shares        % of
                                                   Prior to the               Number of           Owned After the      Outstanding
Name of Selling Security Holder                     Offering                Shares Offered           Offering           Shares (1)

David Lane                                              3,616,667 (2)              3,616,667                       0            0.0 %
Michael Schmahl                                         2,900,000 (3)              2,900,000                       0            0.0 %
Kenneth Ikemiya                                         1,871,666 (4)              1,666,666                 205,000            0.1 %
Lawrence Wert                                           1,916,666 (5)              1,666,666                 250,000            0.1 %
Beth Elman                                                466,666 (6)                416,666                  50,000            0.0 %
Jerome Gildner                                            666,666 (7)                666,666                       0            0.0 %
Lester Boelter                                          2,330,166 (8)              2,083,333                 246,833            0.1 %
KBA Holdings                                              833,334 (9)                833,334                       0            0.0 %
James G Athas                                           1,350,000 (10)             1,250,000                 100,000            0.0 %
Howard Bialick and Mary Beth Bialick                    4,730,500 (11)             4,475,000                 255,500            0.1 %
Howard Bialick                                            416,667 (12)               416,667                       0            0.0 %
Dennis Holman                                           2,333,334 (13)             2,333,334                       0            0.0 %
The Knipf Family Trust                                  1,733,334 (14)             1,733,334                       0            0.0 %
Anesthesia Consulting 401K                              1,766,666 (15)             1,666,666                 100,000            0.0 %
John Kyees                                              1,500,001 (16)             1,500,001                       0            0.0 %
J.R. McGraw                                             2,970,250 (17)             2,970,250                       0            0.0 %
Meyers Associates, LP                                     538,239 (18)               538,239                       0            0.0 %
Nicholas Carosi III                                    10,975,000 (19)             3,975,000               7,000,000            3.3 %
George Johnnson                                         1,115,997 (20)             1,115,997                       0              0%
Terry Murphy                                              261,825 (21)               261,825                       0            0.0 %
Hayden McMillian                                          195,233 (22)               195,233                       0            0.0 %
Allan Cruikshanks                                         195,233 (23)               195,233                       0            0.0 %
Christopher Wynne                                         232,160 (24)               232,160                       0            0.0 %
Joseph Mahalick                                            45,000 (25)                45,000                       0            0.0 %
Nicholas Carosi Irrevoc. Trust c/o BB&T                    70,833 (26)                70,833                       0            0.0 %
David Dent                                              1,543,333 (27)               833,333                 710,000            0.3 %
Michael Geiskopf and Rita Geiskopf                        333,833 (28)               333,833                       0            0.0 %
Dean Suhre                                                621,667 (29)               416,667                 205,000            0.1 %
Nova J Page and Richard D Page                            266,333 (30)               266,333                       0            0.0 %
Timothy Alpers                                            442,667 (31)               166,667                 276,000            0.1 %
Kenneth Sutin                                             416,667 (32)               416,667                       0            0.0 %
                                                       48,656,603                 39,258,270

(1)
          Based on 187,071,442 shares of common stock outstanding as of June 30, 2012.
(2)
          Includes 1,950,000 shares of common stock issuable upon the exercise of outstanding warrants.
(3)
          Includes 1,450,000 shares of common stock issuable upon the exercise of outstanding warrants.
(4)
          Includes 833,333 shares of common stock issuable upon the exercise of outstanding warrants.
(5)
          Includes 833,333 shares of common stock issuable upon the exercise of outstanding warrants.
(6)
          Includes 208,333 shares of common stock issuable upon the exercise of outstanding warrants.
(7)
          Includes 333,333 shares of common stock issuable upon the exercise of outstanding warrants.


                                                                     49
(8)
          Includes 1,875,000 shares of common stock issuable upon the exercise of outstanding warrants.
(9)
          Includes 416,667 shares of common stock issuable upon the exercise of outstanding warrants.
(10)
          Includes 625,000 shares of common stock issuable upon the exercise of outstanding warrants.
(11)
          Includes 2,237,500 shares of common stock issuable upon the exercise of outstanding warrants.
(12)
          Includes 416,667 shares of common stock issuable upon the exercise of outstanding warrants.
(13)
          Includes 1,416,667 shares of common stock issuable upon the exercise of outstanding warrants.
(14)
          Includes 866,667 shares of common stock issuable upon the exercise of outstanding warrants.
(15)
          Includes 833,333 shares of common stock issuable upon the exercise of outstanding warrants.
(16)
          Includes 958,334 shares of common stock issuable upon the exercise of outstanding warrants.
(17)
          Includes 1,485,125 shares of common stock issuable upon the exercise of outstanding warrants.
(18)
          Includes 538,239 shares of common stock issuable upon the exercise of outstanding warrants.
(19)
          Mr. Carosi is a member of our board of directors. Includes 3,975,000 shares of common stock issuable upon the exercise of
          outstanding warrants.
(20)
          Includes 1,115,997 shares of common stock issuable upon the exercise of outstanding warrants.
(21)
          Includes 261,825 shares of common stock issuable upon the exercise of outstanding warrants.
(21)
          Includes 195,233 shares of common stock issuable upon the exercise of outstanding warrants.
(22)
          Includes 195,233 shares of common stock issuable upon the exercise of outstanding warrants.
(24)
          Includes 232,160 shares of common stock issuable upon the exercise of outstanding warrants.
(25)
          Includes 45,000 shares of common stock issuable upon the exercise of outstanding warrants.
(26)
          Includes 70,833 shares of common stock issuable upon the exercise of outstanding warrants.
(27)
          Includes 833,333 shares of common stock issuable upon the exercise of outstanding warrants.
(28)
          Includes 333,833 shares of common stock issuable upon the exercise of outstanding warrants.
(29)
          Includes 416,667 shares of common stock issuable upon the exercise of outstanding warrants.
(30)
          Includes 266,333 shares of common stock issuable upon the exercise of outstanding warrants.
(31)
          Includes 166,667 shares of common stock issuable upon the exercise of outstanding warrants.
(32)
          Includes 416,667 shares of common stock issuable upon the exercise of outstanding warrants.

          None of the selling security holders are broker-dealers or affiliates of broker-dealers, other than Meyers Associates, LP which is a
broker-dealer and a member of FINRA and Meyers Associates, LP received placement agent warrants as compensation for services in the
ordinary course of its business as the placement agent for our recent 2012 offering. Meyers Associates LP transferred a portion of the warrants
it received from us as compensation to George Johnson, Joseph Mahalick, and Christopher Wynne as compensation to them in the regular
course of their employment with that firm. At the time of the receipt of the warrants, none had any agreement or understanding, directly or
indirectly, with any person to distribute those securities. None of the selling security holders has, or within the past three years has had, any
position, office or other material relationship with us or any of our predecessors or affiliates, other than as described previously in this section.

         We have agreed to pay full costs and expenses, incentives to the issuance, offer, sale and delivery of the shares, including all fees and
expenses in preparing, filing and printing the registration statement and prospectus and related exhibits, amendments and supplements thereto
and mailing of those items. We will not pay selling commissions and expenses associated with any sale by the selling security holders.

                                                         DESCRIPTION OF SECURITIES

      Our authorized capital stock consists of 1,000,000,000 shares of common stock, $0.001 par value per share, and 10,000,000 shares of
preferred stock, par value $0.001 per share. As of June 30, 2012 there were 187,071,442 shares of common stock and 626,667 shares of Series
B preferred stock issued and outstanding.

COMMON STOCK

      Holders of common stock are entitled to one vote for each share on all matters submitted to a stockholder vote. Holders of common stock
do not have cumulative voting rights. Holders of common stock are entitled to share in all dividends that the board of directors, in its discretion,
declares from legally available funds. In the event of our liquidation, dissolution or winding up, subject to the preferences of any shares of
preferred stock which may then be authorized and outstanding, each outstanding share entitles its holder to participate in all assets that remain
after payment of liabilities and after providing for each class of stock, if any, having preference over the common stock.

     Holders of common stock have no conversion, preemptive or other subscription rights, and there are no redemption provisions for the
common stock. The rights of the holders of common stock are subject to any rights that may be fixed for holders of preferred stock, when and if
any preferred stock is authorized and issued. All outstanding shares of common stock are duly authorized, validly issued, fully paid and
non-assessable.
50
   Preferred Stock

          Our authorized capital includes 10,000,000 shares of blank check preferred stock, par value $0.001 per share. Our board of directors,
without further stockholder approval, may issue our preferred stock in one or more series from time to time and fix or alter the designations,
relative rights, priorities, preferences, qualifications, limitations and restrictions of the shares of each series. In September 2005, Our board of
directors authorized a series of 833,334 shares of blank check preferred stock be designated as Series B convertible preferred stock and on
September 28, 2005, we filed a Certificate of Designations of Preferences, Rights and Limitations of Series B convertible preferred with the
Secretary of State of Delaware. On December 29, 2005, we filed an Amended and Restated Certificate of Designations of Preferences, Rights
and Limitations of Series B convertible preferred stock increasing the number of shares authorized under this series to 1,833,334 shares.
Presently, there are 626,667 shares of our Series B convertible preferred stock issued and outstanding.

         The designations, rights and preferences of the Series B convertible preferred stock provide:

 no dividends are payable on the Series B convertible preferred stock. So long as these shares are outstanding, we cannot pay dividends on
  our common stock nor can it redeem any shares of its common stock, the shares of Series B convertible preferred stock do not have any
  voting rights, except as may be provided under Delaware law,

 so long as the shares are outstanding, we cannot change the designations of the Series B convertible preferred stock, create a class of
  securities that in the instance of payment of dividends or distribution of assets upon our liquidation ranks senior to or pari passu with the
  Series B convertible preferred stock or increase the number of authorized shares of Series B convertible preferred stock, the shares carry a
  liquidation preference of $0.2727 per share,

 each share of Series B convertible preferred stock is convertible at the option of the holder into one share of our common stock based upon
  an initial conversion value of $0.2727 per share. The conversation ratio is subject to adjustment in the event of stock dividends, stock
  splits or reclassification of our common stock. The conversion ratio is also subject to adjustment in the event we should sell any shares of
  its common stock or securities convertible into common stock at an effective price less than the conversion ratio then in effect, in which
  case the conversion ratio would be reduced to the lesser price. No conversion of the Series B convertible preferred stock may occur if a
  conversion would result in the holder, and any of its affiliates beneficially owning more than 4.9% of our outstanding common shares
  following such conversion. This provision may be waived or amended only with the consent of the holders of all of the Series B
  convertible preferred stock and the consent of the holders of a majority of our outstanding shares of common stock who are not affiliates,

 so long as the Series B convertible preferred stock is outstanding, we have agreed not to issue any rights, options or warrants to holders of
  its common stock entitling the holders to purchase shares of its common stock at less than the conversion ratio without the consent of the
  holders of a majority of the outstanding shares of Series B convertible preferred stock. If we should elect to undertake such an issuance
  and the Series B holders consent, the conversion ratio would be reduced. Further, if we should make a distribution of any evidence of
  indebtedness or assets or rights or warrants to subscribe for any security to our common stockholders, the conversion value would be
  readjusted,

 the shares of Series B convertible preferred stock automatically convert into shares of our common stock in the event of change of control
  of our company, and

 so long as the shares of Series B convertible preferred stock are outstanding, we cannot sell or issue any common stock, rights to subscribe
  for shares of common stock or securities which are convertible or exercisable into shares of common stock at an effective purchase price
  of less than the then conversion value of the Series B convertible preferred stock.


                                                                         51
COMMON STOCK PURCHASE WARRANTS

     We currently have outstanding common stock purchase warrants to purchase an aggregate of 290,000 shares of our common stock at an
exercise prices $0.50 per share. These warrants expire between December 31, 2012 and February 28, 2012. The exercise price of the warrants
is subject to pro-rata adjustment in the event of stock splits, recapitalizations and similar corporate events.

Warrants issued in the September 2011 private offering

          In connection with our September 2011 private offering, we issued five year Series N warrants to purchase up to an aggregate of
10,738,939 shares of our common stock with an exercise price of $0.15 per share, including 976,267placement agent warrants issued to
Anderson and Strudwick, Inc. The warrants are callable by us at a call price of $0.25 per underlying common share should our common stock
trade at or above $0.25 per share, based on the reported closing bid price of the common stock on the OTC Bulletin Board for 10 consecutive
trading days, following 20 business days’ prior written notice.

         The exercise price and call price of the warrants are subject to adjustment in the event of stock splits, recapitalizations and similar
corporate events.

Warrants issued in November 2011 private offering

         In connection with November 2011 private offering, we issued Series O, Series P and Series Q warrants to purchase up to an
aggregate of 82,092,138 shares of our common stock, as adjusted. with an initial exercise price of $0.074 per share, as adjusted, and subject to
adjustment as described below and including warrants to purchase 2,092,595 shares as placement agent compensation. The Series O warrants
and Series P warrants are each immediately exercisable. The Series Q warrants become exercisable at any time that any portion of the Series P
warrants are exercised. The term of the Series O warrants is five years from the issue date, the term of the Series P warrants is one year from
the Applicable Date, as that term is defined in the warrant, and the term of the Series Q warrants is five years from the Applicable Date. Other
than the exercise periods, all three series of warrants are identical. The warrants are also exercisable on a cashless basis during the first six
months the warrants are outstanding or at any time the registration statement covering the shares issuable upon the exercise of the warrants is
not effective. The warrants are not exercisable if, after giving effect to the exercise, the holder or any of its affiliates would be the beneficial
owner as determined in accordance with the rules of the SEC of in excess of 4.9% of our outstanding shares of common stock. If we issue
options, convertible securities, warrants or similar securities to holders of our common stock, the warrant holders shall have the right to acquire
the same as if they had exercised the warrants into common stock.

         The exercise price is subject to adjustment for stock splits, combinations or similar events, and, in such event, the number of shares
issuable upon the exercise of the warrants will also be adjusted such that the aggregate warrant exercise price shall be the same immediately
before and immediately after such adjustment. In addition, the warrant exercise price is also subject to a “full ratchet” anti-dilution adjustment
which, in the event that we issue or are deemed to have issued, certain securities at a price lower than the then applicable warrant exercise
price, immediately reduces warrant exercise price to equal the price at which we issued or was deemed to have issued, our common stock.

          If we sell or issue any options or convertible securities that are convertible into or exchangeable or exercisable for shares of our
common stock at a price which varies or may vary with the market price of the shares of common stock, including by way of one or more
reset(s) to a fixed price, but exclusive of such formulations reflecting customary anti-dilution provisions, the holder of a warrant will have the
right to substitute the variable price for the warrant exercise price upon exercise of all or part the warrant.

Warrants issued in the 2012 offering

         In connection with our 2012 private offering, we issued 14,801,554 Series R five common stock purchase warrants which are
exercisable at $0.15 per share, including warrants to purchase 1,345,596 shares as placement agent compensation. The warrants are also
exercisable on a cashless basis at any time after 12 months that the registration statement covering the shares issuable upon the exercise of the
warrants is not effective. The warrants are not exercisable if, after giving effect to the exercise, the holder or any of its affiliates would be the
beneficial owner as determined in accordance with the rules of the SEC of in excess of 4.9% of our outstanding shares of common stock. This
limitation may be increased by the holder to 9.99% upon 61 days prior notice to us.


                                                                          52
         The exercise price of the warrants is subject to adjustment in the event of stock splits, recapitalizations and similar corporate events.
Generally, whenever the number of shares our common stock underlying the warrant is adjusted, as herein provided, the exercise price payable
upon the exercise of the warrant will be adjusted to that price determined by multiplying the exercise price immediately prior to the adjustment
by a fraction (i) the numerator of which will be the number of shares of our common stock purchasable upon exercise of the warrant
immediately prior to the adjustment, and (ii) the denominator of which will be the number of shares of our common stock purchasable upon
exercise of the warrant immediately after the adjustment.

          The Series R warrants are callable by us in the event the closing price of our common shares on the OTC Bulletin Board closes at or
above $0.25 per share for 10 consecutive trading days, providing that the shares of our common stock underlying the warrants are covered by
an effective registration statement. If we distribute to all holders of our common stock any shares of capital stock, other than common stock, or
evidences of our indebtedness or assets, excluding cash dividends or distributions paid from retained earnings or our current year’s or prior
year’s earnings, or rights or warrants to subscribe for or purchase any of our securities while the warrant is outstanding, we agreed to reserve
shares or other units of these securities for distribution to the warrant holder upon exercise of the warrant so that, in addition to the shares of
our common stock the holder will receive upon exercise, the holder will also receive upon exercise the amount and kind of these additional
securities which the warrant holder would have received if the warrant holder had, immediately prior to the record date for the distribution of
the securities, exercised the warrant.

SENIOR CONVERTIBLE NOTES

          In connection with November 2011 private offering, we issued $2,012,500 principal senior convertible notes. The senior convertible
notes are senior unsecured indebtedness of our company, senior to all other indebtedness other than our obligations to Sand Hill Finance, LLC,
with which it is pari passu, and guaranteed by our subsidiaries. The senior convertible notes do not bear any interest unless there has been an
“event of default” as described below, at which time interest begins accruing at 18% per annum, compounded quarterly. Monthly installment
payments on the principal amount of the senior convertible notes begin on the earlier of six months from the issuance date of the notes or upon
the effectiveness of the registration statement registering the shares of our common stock into which the senior convertible notes are
convertible; the registration statement was declared effective by the SEC on February 8, 2012.

          Installment payments under the senior convertible notes may either be made in shares of our common stock or cash. We are not able to
make the installment payments in shares of our common stock if there has been an “equity conditions failure” or “dollar failure.” Generally,
under the terms of the senior convertible notes an “equity conditions failure” means that the shares of our common stock issuable for the
installment payment are not covered by an effective registration statement or the issuance of the shares would cause the holder or its affiliates
to be the beneficial owners of in excess of 4.9% of our outstanding common stock, together with certain other “equity conditions” as described
in the senior convertible notes. A “dollar failure” means that the average of the aggregate trading volumes of our common stock for the 20
trading days preceding the installment date has not equaled or exceeded $25,000. If we cannot make installment payment in shares of common
stock because one of these conditions is not satisfied, we must make such payment in cash. Unless previously converted into shares of our
common stock, the senior convertible notes mature on May 23, 2013. Except as described below, we have no right to prepay any amounts due
under the senior convertible notes.

          The senior convertible notes are convertible at the option of the holders into shares of our common stock at an initial conversion price
of $0.074 per share, as adjusted. The conversion price is subject to adjustment for stock splits, combinations or similar events. The conversion
price is also subject to a “full ratchet” anti-dilution adjustment which, in the event that we issue or are deemed to have issued, certain securities
at a price lower than the then applicable conversion price, immediately reduces the conversion price to equal the price at which we issued or
were deemed to have issued our common stock. In addition, if we sell or issue any options or convertible securities that are convertible into or
exchangeable or exercisable for shares of our common stock at a price which varies or may vary with the market price of the shares of common
stock, including by way of one or more reset(s) to a fixed price, but exclusive of such formulations reflecting customary anti-dilution
provisions, the holder of a senior convertible note will have the right to substitute the variable price for the fixed conversion price upon
conversion of all or part of the note. The senior convertible notes provide that no conversion may be made if, after giving effect to the
conversion, the holder or any of its affiliates would be the beneficial owner as determined in accordance with the rules of the SEC of in excess
of 4.9% of our outstanding shares of common stock.


                                                                         53
         Beginning at any time after the earlier of the 30th calendar day immediately following the date that the registration statement was
declared effective by the SEC or the 210th day from the issuance date of the senior convertible notes, and upon at least 10 days but not more
than 30 days prior notice to the holders, we have the right to redeem all amounts outstanding under the senior convertible notes in cash for an
amount equal to 110% of the greater of the amount to be redeemed and the product of the conversion rate and the closing sale price of our
common stock on the trading day immediately preceding the notice of redemption.

         The senior convertible notes contain a variety of events of default which generally include the following events and which apply to
these events by our subsidiaries as well, where applicable:

                  failure to pay any amounts due under the senior convertible notes when due;

                  an occurrence of default under other of our obligations or our bankruptcy, insolvency, reorganization or liquidation;
                  a judgment against us in excess of $25,000 or if we should fail to pay when due any indebtedness due any other creditor in
                   excess of $10,000;
                  if the effectiveness of the registration statement lapses for more than five consecutive days or more than 10 days in any
                   365-day period;
                  the occurrence of a “material adverse effect” as described in the Securities Purchase Agreement which means any material
                   adverse effect on:
                    our business, properties, assets, liabilities, operations, condition or prospects of our company or any subsidiary, either
                   individually or taken as a whole,
                    the transactions contemplated by the private placement documents, or
                    the authority or ability of our company or any of our subsidiaries to perform any of their respective obligations under any
                   of the private placement documents;
                  the failure to issue shares upon conversion of a senior convertible note or exercise of a warrant for more than five trading
                   days after the relevant conversion date or exercise date;
                  notification of our intention not to comply with a request for conversion or exercise; and
                  the failure to remove any restrictive legend on any certificate or any shares of common stock issued upon conversion or
                   exercise required by the terms of Securities Purchase Agreement, unless otherwise prohibited by applicable federal securities
                   laws, and such failure remains uncured for five days.

         If there is an event of default, upon election of the holders of at least 20% of the outstanding principal amount of the senior convertible
notes, we will be obligated to redeem all or any portion of the senior convertible notes, including all accrued and unpaid interest, in cash, at a
price equal to the greater of:

                  110% of the amount being converted, depending on the nature of the default, and

                  the product of (a) the amount being converted multiplied by the closing bid price of our common stock on the trading date
                   immediately before the date of redemption multiplied by (b) the highest closing sale price of our common stock during the
                   period beginning on the date immediately preceding such event of default and ending on the trading day immediately prior
                   to the trading day that the redemption price is paid by us.

         We have agreed not to take certain actions while the senior convertible notes are outstanding, including:

                  incur other indebtedness which is due before 91 days from the payment in full of the senior convertible notes, except for
                   certain permitted indebtedness, nor will we incur any liens, except for certain permitted liens,



                                                                        54
                 accelerate the payment of any indebtedness,
                 pay any dividends or redeem any of our securities,
                 making cash expenditures in excess of $400,000 during any measuring period, as specified in the senior convertible notes,
                 change the nature of our business, or
                 issue any shares of our capital stock other than for cash or in connection with options which may be granted to our officers,
                  directors and employees.

         If we issue options, convertible securities, warrants or similar securities to holders of our common stock, the holders of the senior
convertible notes shall have the right to acquire the same as if they had converted their senior convertible note into common stock.

SHARES ELIGIBLE FOR FUTURE SALE

As of June 30, 2012 there were 187,071,442 shares of common stock issued and outstanding of which approximately 65,996,518 are
“restricted securities.” In general, under Rule 144, as currently in effect, a person, or person whose shares are aggregated, who is not our
affiliate or has not been an affiliate during the prior three months and owns shares that were purchased from us, or any affiliate, at least six
months previously, is entitled to make unlimited public resales of such shares provided there is current public information available at the time
of the resales. After a one-year holding period a non-affiliate is entitled to make unlimited public resales of our shares without the requirement
that current public information be available at the time of the resales. A person, or persons whose shares are aggregated, who are affiliates of
our company and own shares that were purchased from us, or any affiliate, at least six months previously is entitled to sell within any
three month period, a number of shares of our common stock that does not exceed the greater of 1% of the then outstanding shares of our
common stock, subject to manner of sale provisions, notice requirements and the availability of current public information about us.

Future sales of restricted common stock under Rule 144 could negatively impact the market price of our common stock. We are unable to
estimate the number of shares that may be sold in the future by our existing security holders or the effect, if any, that sales of shares by such
security holders will have on the market price of our common stock prevailing from time to time. Sales of substantial amounts of our common
stock by existing security holders could adversely affect prevailing market prices.

                                                              LEGAL MATTERS

The validity of the securities offered by this prospectus will be passed upon for us by Pearlman Schneider, LLP, 2200 Corporate Boulevard,
N.W., Boca Raton, Florida 33431.

                                                                   EXPERTS

     Our financial statements as of and for the years ended September 30, 2011 and 2010 included in this prospectus have been audited by
Sherb & Co., LLP, independent registered public accounting firm, as indicated in their report with respect thereto, and have been so included in
reliance upon the report of such firm given on their authority as experts in accounting and auditing.

                                        WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the Securities and Exchange Commission the registration statement on Form S-1 under the Securities Act of 1933 for the
common stock offered by this prospectus. This prospectus, which is a part of the registration statement, does not contain all of the information
in the registration statement and the exhibits filed with it, portions of which have been omitted as permitted by Securities and Exchange
Commission rules and regulations. For further information concerning us and the securities offered by this prospectus, we refer to the
registration statement and to the exhibits filed with it. Statements contained in this prospectus as to the content of any contract or other
document referred to are not necessarily complete. In each instance, we refer you to the copy of the contracts and/or other documents filed as
exhibits to the registration statement.


                                                                        55
We file annual and special reports and other information with the Securities and Exchange Commission. Certain of our filings are available
over the Internet at the Securities and Exchange Commission’s web site at http://www.sec.gov. You may also read and copy any document we
file with the Securities and Exchange Commission at its public reference facilities:

              Public Reference Room Office
              100 F Street, N.E.
              Room 1580
              Washington, D.C. 20549

You may also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the Securities and Exchange
Commission at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Callers in the United States can also call 1-202-551-8090 for further
information on the operations of the public reference facilities.


                                                                    56
                                                 INDEX TO FINANCIAL STATEMENTS

  Unaudited consolidated financial statements for the three and nine months ended June 30, 2012 including:

                                                                                                             PAGE #

Balance Sheets;                                                                                               F-2
Statements of Operations;                                                                                     F-3
Statements of Cash Flows;                                                                                     F-4
Notes to Financial Statements                                                                                 F-5

    Audited consolidated financial statements for the years ending September 30, 2011 and 2010.

Report of Independent Registered Public Accounting Firm                                                       F-20
 Balance Sheets;                                                                                              F-21
Statements of Operations;                                                                                     F-22
Statements of Stockholders’ Equity (Deficit); and                                                             F-23
Statements of Cash Flows;                                                                                     F-24
Notes to Financial Statements                                                                                 F-25


                                                                   F- 1
                                                               ICEWEB, Inc.
                                                        Consolidated Balance Sheets
                                                                                                            June 30,
                                                                                                              2012               September
                                                                                                          (Unaudited)            30, 2011 (1)
CURRENT ASSETS:
Cash                                                                                                  $          774,012     $           4,120
Subscription receivable                                                                                                -             1,171,520
Accounts receivable, net of allowance of $409,000                                                              1,336,591             1,182,060
Inventory                                                                                                        282,602                55,981
Other current assets                                                                                              13,750                 6,877
Prepaid expenses                                                                                                  30,449                30,248
                                                                                                               2,437,404             2,450,806

OTHER ASSETS:
Property and equipment, net                                                                                      354,643               252,835
Deposits                                                                                                          13,320                13,320
Other assets                                                                                                       1,544                     -
Marketable Securities                                                                                            164,000               115,200
Deferred financing costs, net                                                                                    107,180                     -
Total Assets                                                                                          $        3,078,091     $       2,832,161


CURRENT LIABILITIES:
Accounts payable and accrued liabilities                                                              $        1,032,235     $       2,186,691
Notes payable                                                                                                  2,016,245             1,972,544
Convertible notes payable, net of discount                                                                       328,478                     -
Derivative liability                                                                                           4,523,086                     -
Deferred revenue                                                                                                       -                 4,904
Total Liabilities                                                                                              7,900,044             4,164,139


STOCK HOLDERS’ DEFICIT
Preferred Stock ($.001 par value; 10,000,000 shares authorized)
Series B convertible preferred stock ($.001 par value; 626,667 shares issued and outstanding)                        626                    626
Common stock ($.001 par value; 1,000,000,000 shares authorized; 187,233,942 shares issued and
203,172,274 shares outstanding and 158,121,066 shares issued and 157,959,066 shares outstanding,
respectively)                                                                                                    187,073               157,961
Additional paid in capital                                                                                    35,854,358            32,866,315
Accumulated deficit                                                                                          (40,851,010 )         (34,328,080 )
Accumulated other comprehensive income                                                                            83,000                67,200
Subscription receivable                                                                                          (83,000 )             (83,000 )
Treasury stock, at cost, (162,500 shares)                                                                        (13,000 )             (13,000 )

Total stockholders’ Deficit                                                                                   (4,821,953 )          (1,331,978 )


Total Liabilities and stockholders’ Deficit                                                           $        3,078,091     $       2,832,161


(1) Derived from audited financial statements

                                     See accompanying notes to unaudited consolidated financial statements


                                                                    F- 2
                                                                ICEWEB, Inc.
                                                     Consolidated Statements of Operations
                                                                  (Unaudited)

                                                                     Three Months Ended                        Nine Months Ended
                                                                           June 30                                  June 30
                                                                    2012             2011                     2012            2011

Sales                                                          $       654,996       $      719,727      $     2,546,852     $     2,514,164

Cost of sales                                                          444,015              380,784            1,669,704           1,317,299
Gross profit                                                           210,981              338,943              877,148           1,196,865

Operating expenses:
Sales and marketing                                                    308,698              123,955              641,255             898,299
Depreciation and amortization expense                                   33,797              124,831              149,435             418,625
Research and development expense                                       289,242              187,810              708,325             547,579
General and administrative                                             438,795              495,963            1,331,939           1,617,786
Total Operating Expenses                                             1,070,532              932,559            2,830,954           3,482,289

Loss from operations                                                  (859,551 )            (593,616 )        (1,953,806 )        (2,285,424 )

Other income (expenses):
Gain/(loss) on change in fair value of derivative liability         (2,156,007 )                   -          (2,773,086 )                 -
Interest income                                                              -                     -                  22                   -
Interest expense                                                      (984,317 )            (104,653 )        (1,796,060 )          (302,908 )
Total other income (expenses):                                      (3,140,324 )            (104,653 )        (4,569,124 )          (302,908 )

Net loss                                                       $    (3,999,875 )     $      (698,269 )   $    (6,522,930 )   $    (2,588,332 )

Loss per common share basic and diluted                        $           (0.01 )   $         (0.00 )   $         (0.04 )   $         (0.02 )

Weighted average common shares outstanding basic and
diluted                                                            170,774,234           143,553,735         162,922,093         140,673,273

                                     See accompanying notes to unaudited consolidated financial statements


                                                                    F- 3
                                                               ICEWEB, Inc.
                                                    Consolidated Statements of Cash Flows
                                                                 (Unaudited)

                                                                                                            Nine Months Ended
                                                                                                                  June 30,
                                                                                                           2012            2011
NET CASH USED IN OPERATING ACTIVITIES                                                                  $   (4,375,749 ) $  (1,827,791 )

CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in marketable securities                                                                          (33,000 )               -
Purchase of property and equipment                                                                          (217,446 )         (60,061 )
NET CASH USED IN INVESTING ACTIVITIES                                                                       (250,446 )         (60,061 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible note payable                                                                     1,750,000                 -
Proceeds from subscription receivable                                                                      1,171,520                 -
Proceeds from conversion of warrants                                                                         102,460                 -
Payment of financing costs                                                                                  (571,270 )               -
Proceeds from the sale of restricted common stock                                                          1,834,347           409,464
Proceeds from notes payable                                                                                  301,896           818,481
Proceeds from exercise of common stock options                                                               180,717           720,148
Proceeds from payments on convertible debenture                                                              884,612                 -
Payments on notes payable                                                                                   (258,195 )        (596,213 )
NET CASH PROVIDED BY FINANCING ACTIVITIES                                                                  5,396,087         1,351,880

NET INCREASE (DECREASE) IN CASH                                                                              769,892          (535,972 )

CASH - beginning of period                                                                                     4,120          540,156

CASH - end of period                                                                                   $     774,012     $       4,184


Supplemental disclosure of cash flow information:
Cash paid for :
Interest                                                                                               $     214,686     $    198,225
Income taxes                                                                                                      —                 —


                                   See accompanying notes to unaudited consolidated financial statements


                                                                    F- 4
                                            ICEWEB, INC. AND SUBSIDIARIES
                               NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                                     June 30, 2012

NOTE 1 - NATURE OF BUSINESS

Headquartered just outside of Washington, D.C., we manufacture high performance unified data storage appliances with enterprise storage
management capabilities. Through thin provisioning, target deduplication and inline compression managed through IceWEB’s proprietary
IceSTORM™ Operating System, IceWEB’s unified storage appliances enable standardization, consolidation and optimized storage utilization
for virtual and cloud environments, saving up to 90% of storage costs, while reducing space, power and cooling requirements and simplifying
storage management. Our customer base includes mid-sized businesses, large enterprises, and government organizations.

Major shifts in data center environments toward virtual and cloud based infrastructures have significantly increased the need for storage
resources that can handle the complex and mixed systems that combine both file and block data. Unified Data Storage from IceWEB reduces
this complexity by providing a simplified environment to enable virtualization and cloud computing deployments, protection, and cost
savings. Unified Data Storage also provides cost savings through optimized storage utilization, made possible through IceWEB’s thin
provisioning, storage pooling, compression and deduplication.

We generate revenue from the manufacture and sale of high-performance unified data storage appliances with IceWEB’s proprietary
IceSTORM TM (STorage Optimization and Resource Management) Operating System.

NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accounting
principles and include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances
have been eliminated in consolidation.

Reclassifications
Certain reclassifications have been made to previously reported amounts to conform to 2012 amounts. The reclassifications had no impact on
previously reported results of operations or shareholders’ deficit.

Going Concern
Our auditors stated in their report on the consolidated financial statements of the Company for the years ended September 30, 2011 and 2010
that we have had losses since inception that raise doubt about our ability to continue as a going concern. In addition and as discussed further in
Note 6, we are not in compliance with debt covenants under our Financing Agreements with Sand Hill Finance LLC. For the year ended
September 30, 2011 we incurred a net loss of $4,705,291 and for the Nine Months Ended June 30, 2012 we incurred a net loss of $6,522,930.
The consolidated financial statements do not include any adjustments related to the recovery and classification of recorded assets, or the
amounts and classification of liabilities that might be necessary in the event we cannot continue in existence.

Management has established plans intended to increase the sales of our products and services. Management intends to seek new capital from
new equity securities offerings to provide funds needed to increase liquidity, fund growth, and implement its business plan. However, no
assurances can be given that we will be able to raise any additional funds.

Marketable Securities
IceWEB accounts for the purchase of marketable equity securities in accordance with ASC 320, “Investment – Debt and Equity Securities”
with any unrealized gains and losses included as a net amount as a separate component of stockholders’ equity. However, those securities may
not have the trading volume to support the stock price if the Company were to sell all their shares in the open market at once, so the Company
may have a loss on the sale of marketable securities even though they record marketable equity securities at the current market value.


                                                                      F- 5
                                               ICEWEB, INC. AND SUBSIDIARIES
                                  NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                                         June 30, 2012


Use of Estimates
The preparation of financial statements in accordance 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 of the balance sheets and the reported amounts of sales and expenses during the reporting periods. Actual results could
differ from those estimates. Significant estimates in 2012 and 2011 include the allowance for doubtful accounts, the valuation of stock-based
compensation, the allowance for inventory obsolescence and the useful life of property and equipment and intangible assets, derivative
liabilities, and litigation reserves.

Cash and Cash Equivalents
We consider all highly liquid debt instruments with original maturities of three months or less to be cash equivalents.

Accounts Receivable
Accounts receivable consists of normal trade receivables. We recorded a bad debt allowance of $409,000 as of June 30, 2012. Management
performs ongoing evaluations of its accounts receivable. Management believes that all remaining receivables are fully collectable. Bad debt
expense amounted to $0 for the three and nine months ended June 30, 2012.

Derivative Liability
The Company issued warrants to purchase the Company’s common stock in connection with the issuance of convertible debt, which contain
certain ratchet provisions that reduce the exercise price of the warrants or the conversion price in certain circumstances. Upon the Company’s
adoption of the Derivative and Hedging Topic of the FASB Accounting Standards Codification (“ASC 815”) on January 1, 2009, the Company
determined that the warrants and/or the conversion features with provisions that reduce the exercise price of the warrants did not qualify for a
scope exception under ASC 815 as they were determined not to be indexed to the Company’s stock as prescribed by ASC 815.

Derivatives are required to be recorded on the balance sheet at fair value (see Note 7). These derivatives, including embedded derivatives in
the Company’s structured borrowings, are separately valued and accounted for on the Company’s balance sheet. Fair values for exchange
traded securities and derivatives are based on quoted market prices. Where market prices are not readily available, fair values are determined
using market based pricing models incorporating readily observable market data and requiring judgment and estimates. In addition, additional
disclosures is required about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items
are accounted for and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and
cash flows.

Fair Value Measurements
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
established fair value hierarchy 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:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices
for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities that are not active; and model-driven
valuations whose inputs are observable or whose significant value drivers are observable. Valuations may be obtained from, or corroborated
by, third-party pricing services.


                                                                         F- 6
                                               ICEWEB, INC. AND SUBSIDIARIES
                                  NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                                         June 30, 2012


Level 3: Unobservable inputs to measure fair value of assets and liabilities for which there is little, if any market activity at the measurement
date, using reasonable inputs and assumptions based upon the best information at the time, to the extent that inputs are available without undue
cost and effort.

Fair Value of Financial Instruments
The Company’s financial instruments, including cash and cash equivalents, receivables, accounts payable and accrued liabilities and notes
payable are carried at cost, which approximates their fair value, due to the relatively short maturity of these instruments.

Our derivative financial instruments, consisting of embedded conversion features in our convertible debt, which are required to be measured at
fair value on a recurring basis under FASB ASC 815-15-25 or FASB ASC 815 as of June 30, 2012 are measured at fair value, using a
Black-Scholes valuation model which approximates a binomial lattice valuation methodology utilizing Level 3 inputs. Level 3 inputs are
unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities (see Note
7).

Inventory
Inventory is valued at the lower of cost or market, on an average cost basis.

Property and Equipment
Property and equipment is stated at cost, net of accumulated depreciation. Depreciation expense is recorded by using the straight-line method
over the estimated useful lives of the related assets.

Software Development Costs
The costs for the development of new software products and substantial enhancements to existing software products are expensed as incurred
until technological feasibility has been established, at which time any additional costs would be capitalized in accordance with the accounting
guidance for software.

Because our current process for developing software is essentially completed concurrently with the establishment of technological feasibility,
which occurs upon the completion of a working model, no costs have been capitalized for any of the periods presented.

Intangible Assets
Intangible assets, net consists of the cost of acquired customer relationships. We capitalize and amortize the cost of acquired intangible assets
over their estimated useful lives on a straight-line basis. The Company periodically reevaluates the carrying value of its intangible assets for
events or changes in circumstances that indicate that the carrying value may not be recoverable. As part of this reevaluation, the Company
estimates the future cash flows expected to result from the use of the asset. If the sum of the expected future cash flows is less than the carrying
amount of the asset, an impairment loss is recognized to reduce the carrying value of the intangible asset to the estimated fair value of the asset.

Long-lived Assets
In accordance with ASC Topic 360, “Property, Plant, and Equipment” (formerly SFAS 144, “Accounting for the Impairment or Disposal of
Long-Lived Assets”), we review the carrying value of intangibles and other long-lived assets for impairment at least annually or whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is
measured by comparison of its carrying amount to the undiscounted cash flows that the asset or asset group is expected to generate. If such
assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property,
if any, exceeds its fair market value.

Advertising
Advertising costs are expensed as incurred and amounted to $93,975 in fiscal 2012 and $215,428 in fiscal 2011.


                                                                         F- 7
                                              ICEWEB, INC. AND SUBSIDIARIES
                                 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                                        June 30, 2012


Revenue Recognition
We follow the guidance of Accounting Standards Codification (ASC) Topic 605, “Revenue Recognition” (formerly Staff Accounting Bulletin
(SAB) No. 104, “Revenue Recognition”) for revenue recognition. In general, we record revenue when persuasive evidence of an arrangement
exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability
is reasonably assured. The following policies reflect specific criteria for our various revenues streams:

Revenues from sales of products are generally recognized when products are shipped unless the Company has obligations remaining under
sales or licensing agreements, in which case revenue is either deferred until all obligations are satisfied or recognized ratably over the term of
the contract.

Revenue from services is recorded as it is earned. Commissions earned on third party sales are recorded in the month in which contracts are
awarded. Amounts billed in advance of services being provided are recorded as deferred revenues and recognized in the consolidated statement
of operations as services are provided.

Earnings per Share
We compute earnings per share in accordance with ASC Topic 260, “Earnings Per Share” Under the provisions of ASC Topic 260, basic
earnings per share is computed by dividing the net income (loss) for the period by the weighted average number of common shares outstanding
during the period. Diluted earnings per share is computed by dividing the net income (loss) for the period by the weighted average number of
common and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares consist of the common
shares issuable upon the exercise of stock options and warrants (using the treasury stock method) and upon the conversion of convertible
preferred stock (using the if-converted method). Potentially dilutive common shares are excluded from the calculation if their effect is
antidilutive. At June 30, 20112, there were options and warrants to purchase 96,961,072 shares of common stock, 626,667 shares issuable upon
conversion of Series B preferred stock, and no shares of Series C preferred stock outstanding which could potentially dilute future earnings per
share.

Stock-Based Compensation
As more fully described in Note 12, we have a stock option plan that provides for non-qualified and incentive stock options to be issued to
directors, officers, employees and consultants (the 2000 Management and Director Equity Incentive and Compensation Plan (the “Plan”).

Prior to October 1, 2005, we accounted for stock options issued under the Plan under the recognition and measurement provisions of APB
Opinion No. 25, Accounting for Stock Issued to Employees , and related interpretations, as permitted by ASC Topic 718, “Compensation –
Stock Compensation, “Share-Based Payments”. No stock-based compensation cost related to employee stock options was recognized in the
Consolidated Statement of Operations for the year ended September 30, 2005 as all options granted under the Plan had an exercise price equal
to the market value of the underlying common stock on the date of grant.

Effective October 1, 2005, we adopted the fair value recognition provisions of ASC Topic 718, “Compensation – Stock Compensation,
“Share-Based Payments using the modified-prospective-transition method. Under that transition method, compensation cost recognized in the
year ended September 30, 2006 includes: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of
September 30, 2005, based on the grant date fair value estimated in accordance with the original provisions of Statement 123, and (b)
compensation cost for all share-based payments granted subsequent to October 1, 2005, based on the grant-date fair value estimated in
accordance with the provisions of Statement 123(R). Financial results for the year ended September 30, 2005 have not been restated.

Recently Issued Accounting Standards

In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-04, “Fair Value
Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and
International Financial Reporting Standards” (“IFRS”). The amendments in this ASU generally represent clarification of Topic 820, but also
include instances where a particular principle or requirement for measuring fair value or disclosing information about fair value measurements
has changed. This update results in common principles and requirements for measuring fair value and for disclosing information about fair
value measurements in accordance with GAAP and IFRS. The amendments are effective for interim and annual periods beginning after
December 15, 2011 and are to be applied prospectively. Early application is not permitted. We do not expect the adoption of ASU 2011-04 will
have a material impact on the Company’s Condensed Consolidated Financial Statements.


                                                                       F- 8
                                               ICEWEB, INC. AND SUBSIDIARIES
                                  NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                                         June 30, 2012

NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income” (amended
further under ASU No. 2011-12 in December 2011). This guidance eliminates the current option to report other comprehensive income and its
components in the statement of changes in equity. The guidance allows two presentation alternatives; present items in net income and other
comprehensive income in one continuous statement, referred to as the statement of comprehensive income, or in two separate, but consecutive,
statements of net income and other comprehensive income. This guidance is effective as of the beginning of a fiscal year that begins after
December 15, 2011. Early adoption is permitted, but full retrospective application is required under both sets of accounting standards. The
Company is currently evaluating which presentation alternative it will utilize.

In September 2011, the FASB issued ASU No. 2011-08, “Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for Impairment”,
which simplifies how entities test goodwill for impairment. Previous guidance under Topic 350 required an entity to test goodwill for
impairment using a two-step process on at least an annual basis. First, the fair value of a reporting unit was calculated and compared to its
carrying amount, including goodwill. Second, if the fair value of a reporting unit was less than its carrying amount, the amount of impairment
loss, if any, was required to be measured. Under the amendments in this update, an entity has the option to first assess qualitative factors to
determine whether the existence of events or circumstances leads the entity to determine that it is more likely than not that its fair value is less
than its carrying amount. If after assessing the totality of events or circumstances, an entity determines that it is not more likely than not that the
fair value of the reporting unit is less than its carrying amount, then the two-step impairment test is unnecessary. If the entity concludes
otherwise, then it is required to test goodwill for impairment under the two-step process as described in Topic 350 under paragraphs
350-20-35-4 and 350-20-35-9 under Topic 350. The amendments are effective for annual and interim goodwill impairment tests performed for
fiscal years beginning after December 15, 2011 and early adoption is permitted. The Company is currently evaluating whether early adoption is
necessary.

In December 2011, the FASB issued Accounting Standards Update (ASU) No, 2011-11, Balance Sheet (Topic 210): Disclosures about
Offsetting Assets and Liabilities . The amendments in this ASU require an entity to disclose information about offsetting and related
arrangements on its financial position. This includes the effect or potential effect of rights of offset associated with an entity’s recognized assets
and recognized liabilities and require improved information about financial instruments and derivative instruments that are either (1) offset in
accordance with Section 210-20-45 or Section 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement,
irrespective of whether they are offset in accordance with Section 210-20-45 or Section 915-10-45. The amendments are effective for annual
reporting periods beginning on or after January 1, 2013 and retrospective disclosure is required for all comparative periods presented. No early
adoption is permitted. Currently, the Company does not enter into any right of offset arrangements and expects implementation to have little or
no impact.

NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment, net, consists of the following:

                                                                                                                             September 30,
                                                                                    Estimated Life      June 30, 2012            2011
       Office equipment                                                                   5 years       $     448,831        $      836,041
       Computer software                                                                  3 years              29,523               612,379
       Furniture and fixtures                                                             5 years                    -              261,385
       Leasehold improvements                                                           2 - 5 years         1,030,845             1,026,470
                                                                                                            1,509,199             2,736,275
       Less: accumulated depreciation                                                                      (1,154,556 )          (2,483,440 )

                                                                                                        $       354,643      $       252,835


Depreciation expense for the Nine Months Ended June 30, 2012 and 2011 was $149,435 and $236,306 respectively.

                                                                        F- 9
                                              ICEWEB, INC. AND SUBSIDIARIES
                                 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                                        June 30, 2012


NOTE 4 - INVENTORY

Inventory consisted of the following:

                                                                                             September,
                                                                              June 30,           30,
                                                                                2012            2011
                                    Raw materials                            $ 226,082      $      44,785
                                    Work in progress                             42,390              8,397
                                    Finished goods                               14,130              2,799
                                                                             $ 282,602      $      55,981


NOTE 5 - NOTES PAYABLE

Sand Hill Finance, LLC

On December 19, 2005, the Company entered into a Financing Agreement with Sand Hill Finance, LLC pursuant to which, together with
related amendments, the Company may borrow up to 80% on the Company’s accounts receivable balances up to a maximum of $1,800,000. In
conjunction with the acquisition of Inline Corporation in December, 2008, the lending limit on the credit facility was increased to $2,750,000.
In addition, the Company and Sand Hill Finance, LLC entered into a 36 month term note agreement in the amount of $1,000,000. Amounts
borrowed under the Financing Agreement are secured by a first security interest in substantially all of the Company’s assets. At June 30, 2012,
the principal amount due under the Financing Agreement amounted to $2,016,245.

Interest on the accounts receivable-based borrowings is payable at a rate of 1.75% per month on the average loan balance outstanding during
the year, equal to an annual interest of approximately 21% per year. The Company also agreed to pay an upfront commitment fee of 1% of the
credit line upon signing the Financing Agreement, half of which was due and paid upon signing (amounting to $9,000) and half of which is due
on the first anniversary of the Financing Agreement. In addition, the Company is obligated to pay a commitment fee of 1% of the credit limit
annually, such amounts are payable on the anniversary of the agreement.

In connection with the Financing Agreement, the Company issued Sand Hill Finance, LLC, a seven-year common stock purchase warrant to
purchase 25,000 shares of our common stock at an exercise price of $1.00 per share. The exercise price was subsequently reduced to $0.50 per
share pursuant to Warrant Amendment Agreement which was executed in conjunction with the convertible debenture. The warrant contains a
cashless exercise provision which means that at the option of the holder, the warrant is convertible into a number of shares of our common
stock as determined by dividing the aggregate fair market value of the Company’s common stock minus the aggregate exercise price of the
warrant by the fair market value of one share of common stock. The number of shares issuable upon the exercise of the warrant and the
exercise price are subject to adjustment in the event of stock dividends, stock splits and reclassifications. The fair value of the warrant of
$16,250 has been recorded as an addition to paid-in capital and interest expense during the year ended September 30, 2008.

In connection with the term note, the Company issued Sand Hill Finance, LLC a seven-year common stock purchase warrant to purchase
120,000 shares of our common stock at an exercise price of $1.00 per share. The exercise price was subsequently reduced to $0.50 per share
pursuant to Warrant Amendment Agreement which was executed in conjunction with the convertible debenture. The warrant contains a
cashless exercise provision which means that at the option of the holder, the warrant is convertible into a number of shares of our common
stock as determined by dividing the aggregate fair market value of the Company’s common stock minus the aggregate exercise price of the
warrant by the fair market value of one share of common stock. The number of shares issuable upon the exercise of the warrant and the
exercise price are subject to adjustment in the event of stock dividends, stock splits and reclassifications. The fair value of the warrant of
$13,589 has been recorded as an addition to paid-in capital and deferred finance costs during the year ended September 30, 2009.


                                                                     F- 10
                                              ICEWEB, INC. AND SUBSIDIARIES
                                 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                                        June 30, 2012

NOTE 5 - NOTES PAYABLE (continued)

The Financing Agreement has a term of one year, subject to mutual extension by both parties. As a result, the balance due to Sand Hill Finance,
LLC is classified as a current liability on the accompanying consolidated balance sheet.

The terms of the Financing Agreement also restrict the Company from undertaking certain transactions without the written consent of the
creditor including (i) permit or suffer a change in control involving 20% of its securities, (ii) acquire assets, except in the ordinary course of
business, involving payment of $100,000 or more, (iii) sell, lease, or transfer any of its property except for sales of inventory and equipment in
the ordinary course of business, (iv) transfer, sell or license any intellectual property, (v) declare or pay a dividend on stock, except payable in
the form of stock dividends (vi) incur any indebtedness other than trade credit in the ordinary course of business and (vii) permit any lien or
security interest to attach to any collateral.

In November, 2011, in connection with the Company’s private placement of convertible notes and Securities Purchase Agreement (see Note 9),
Sand Hill Finance, LLC executed an amendment to the Financing Agreement in which Sand Hill Finance LLC agreed that they would not
pursue any remedies of default under the Financing Agreement until at least the ninety-first day after the obligations under the convertible
notes have been fully satisfied.

NOTE 6 - CONCENTRATION OF CREDIT RISK

Bank Balances

The Company maintains cash in financial institutions insured by the Federal Deposit Insurance Corporation (“FDIC”), including non-interest
bearing transaction account deposits protected in full in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act (the
“Dodd-Frank Act”). At June 30, 2012 all of the Company’s cash balances were fully insured. The Company has not experienced any losses in
such accounts.

NOTE 7 - INVESTMENTS

(a) Summary of Investments

Marketable Equity Securities :

As of June 30, 2012, the Company’s investments in marketable equity securities are based on the June 30, 2012 stock price as reflected on
the OTCBB stock exchange , reduced by a discount factor if those shares have selling restrictions. These marketable equity securities are
summarized as follows:

                                                                                       Gross                Gross
                                                                                     Unrealized           Unrealized             Fair
       June 30, 2012                                                Cost               Gains               Losses                Value

       Publicly traded equity securities                        $      81,000    $         83,000     $                —     $     164,000

       Total                                                    $      81,000    $         83,000     $                —     $     164,000



                                                                       F- 11
                                               ICEWEB, INC. AND SUBSIDIARIES
                                  NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                                         June 30, 2012

 NOTE 7 - INVESTMENTS (continued)

                                                                                         Gross                Gross
                                                                                       Unrealized           Unrealized             Fair
       September 30, 2011                                           Cost                 Gains               Losses                Value

       Publicly traded equity securities                        $      48,000      $         67,200     $                 —   $     115,200

       Total                                                    $      48,000      $         67,200     $                 —   $     115,200


The unrealized gains are presented in comprehensive income in the consolidated statement of operations and comprehensive income.

(b) Unrealized Gains and Losses on Investments

The following table summarizes the unrealized net gains (losses) associated with the Company’s investments:

                                                                            Three Months Ended                         Nine months Ended
                                                                                  June 30                                   June 30
                                                                            2012           2011                       2012            2011

Net gains/(loss) on investments in publicly traded equity securities $          (164,000 )   $        (32,000 )   $       15,800    $      (384,000 )

Net gains/(loss) on investments                                        $        (164,000 )   $        (32,000 )   $       15,800    $      (384,000 )

On January 1, 2008, the Company adopted ASC 820, which, among other things, defines fair value, establishes a consistent framework for
measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or
nonrecurring basis. The Company did not adopt the ASC 820 fair value framework for nonfinancial assets and liabilities, except for items that
are recognized or disclosed at fair value in the financial statements at least annually. ASC 820 clarifies that fair value is an exit price,
representing the amount that would either be received to sell an asset or be paid to transfer a liability in an orderly transaction between market
participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would
use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier fair value hierarchy, which
prioritizes the inputs used in measuring fair value as follows:

Level 1. Observable inputs such as quoted prices in active markets for identical assets or liabilities;

Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.


                                                                      F- 12
                                               ICEWEB, INC. AND SUBSIDIARIES
                                  NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                                         June 30, 2012


NOTE 7 - INVESTMENTS (continued)

Investment Measured at Fair Value on a Recurring Basis:

                                                                                             Fair Value Measurements Using:
                                                                                     Quoted              Significant
                                                                                      Prices               Other             Significant
                                                                                    in Active            Observable         Unobservable
                                                                                    Markets                Inputs              Inputs
                                                                                    (Level 1)             (Level 2)           (Level 3)
June 30, 2012
Marketable Equity Securities, net of discount for effect of restriction        $                 —     $                   —     $         164,000

Liabilities:
Derivative liabilities                                                         $                 —     $                   —     $       4,523,086

September 30, 2011
Marketable Equity Securities, net of discount for effect of restriction        $                 —     $                   —     $         115,200

Liabilities:
Derivative liabilities                                                         $                 —     $                   —     $               —

We categorize the securities as investments in marketable securities available for sale. These securities are quoted either on an exchange or
inter-dealer quotation (pink sheet) system. Unrealized gains or losses on marketable securities available for sale are recognized as an element of
comprehensive income based on changes in the fair value of the security. Once liquidated, realized gains or losses on the sale of marketable
securities available for sale are reflected in our net income for the period in which the security was liquidated.

Under the guidance of ASC 320, “Investments”, we periodically evaluate other-than-temporary impairment (OTTI) of securities to determine
whether a decline in their value is other than temporary. Management utilizes criteria such as the magnitude and duration of the decline, in
addition to the reasons underlying the decline, to determine whether the loss in value is other than temporary. The term “other-than-temporary”
is not intended to indicate that the decline is permanent. It indicates that the prospects for a near term recovery of value are not necessarily
favorable, or that there is a lack of evidence to support fair values equal to, or greater than, the carrying value of the investment. Once a decline
in value is determined to be other than temporary, the value of the security is reduced and a corresponding impairment charge to earnings is
recognized. In the assessment of OTTI for various securities at September 30, 2010 the guidance in ASC 320, “the Investment-Debt and
Equity Securities,” is carefully followed.

There were no impairment charges on investments in publicly traded equity securities for the Nine Months Ended June 30, 2012 or 2011.

The Company has evaluated its publicly traded equity securities as of June 30, 2012, and has determined that there were no unrealized losses
that indicate an other-than-temporary impairment. This determination was based on several factors, which include the length of time and extent
to which fair value has been less than the cost basis and the financial condition and near-term prospects of the issuer, and the Company’s intent
and ability to hold the publicly traded equity securities for a period of time sufficient to allow for any anticipated recovery in market value.

NOTE 8 - COMPREHENSIVE INCOME (LOSS)

Comprehensive income is comprised of net income (loss) and other comprehensive income or loss. Other comprehensive income or loss refers
to revenue, expenses, gains and losses that under accounting principles generally accepted in the United States are included in comprehensive
income but excluded from net income as these amounts are recorded directly as an adjustment to stockholders’ equity.

Our accumulated other comprehensive income consists of unrealized gains on marketable securities available for sale of $83,000 at June 30,
2012, and $67,200 at September 30, 2011.

NOTE 9 – CONVERTIBLE NOTES

On November 23, 2011, IceWEB, Inc. (the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with three
accredited investors pursuant to which the Company sold $2,012,500 in principal amount of Senior Convertible Notes (the “Notes”) and issued
the investors Series O, Series P and Series Q Warrants (collectively, the “Warrants”) to purchase up to an aggregate of 81,588,029 shares, as
adjusted, of the Company’s common stock for an aggregate purchase price of $1,750,000 in a private transaction exempt from registration
under the Securities Act of 1933, as amended (the “Securities Act”) in reliance on an exemption from registration pursuant to Section 4(2) and
Regulation D of the Securities Act. The Company issued the Notes at an original issue discount of 13%.


                                                                    F- 13
                                              ICEWEB, INC. AND SUBSIDIARIES
                                 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                                        June 30, 2012

 NOTE 9 – CONVERTIBLE NOTES (continued)

                                                                                                      June 30,         September 30,
                                                                                                       2012                2011

       Principal balance of convertible notes                                                     $    1,127,887 $                        -
       Original issue discount, net                                                                     (104,270 )                        -
       Debt discount                                                                                    (695,139 )                        -
       Convertible notes, net of discount                                                         $      328,478 $                        -


The convertible notes have a remaining principal balance of $1,127,887, and are carried on the balance sheet at $328,478 net of the remaining
unamortized discount, which is being amortized as interest expense over the remaining life of the notes. The convertible notes are convertible
into our common stock at a conversion price of $0.074 per share. We can elect to settle any conversion in stock, cash or a combination of stock
and cash.

At June 30, 2012, conversion of the outstanding principal amount of the convertible notes would result in the issuance of 15,241,730 shares of
common stock.

NOTE 10 - DERIVATIVE LIABILITIES

Derivative warrant liability

The Company has warrants issued in connection with our convertible notes payable outstanding with price protection provisions that allow for
the reduction in the exercise price of the warrants in the event the Company subsequently issues stock or securities convertible into stock at a
price lower than the exercise price of the warrants. Simultaneously with any reduction to the exercise price, the number of shares of common
stock that may be purchased upon exercise of each of these warrants shall be increased or decreased proportionately, so that after such
adjustment the aggregate exercise price payable for the adjusted number of warrants shall be the same as the aggregate exercise price in effect
immediately prior to such adjustment. The Company accounted for its warrants with price protection in accordance with FASB ASC Topic
815.

Accounting for Derivative Warrant Liability

The Company’s derivative warrant instruments have been measured at fair value at June 30, 2012 using the Black-Scholes model. The
Company recognizes all of its warrants with price protection in its consolidated balance sheet as liabilities. The liability is revalued at each
reporting period and changes in fair value are recognized currently in the consolidated statements of operations. The initial recognition and
subsequent changes in fair value of the derivative warrant liability have no effect on the Company’s cash flows.

The derivative warrants outstanding at June 30, 2012 are all currently exercisable with a weighted-average remaining life of 4.40 years.

The revaluation of the warrants at each reporting period, as well as the charges associated with issuing additional warrants due to the price
protection features, resulted in the recognition of expense of $2,773,086 and $0 within the Company’s consolidated statements of operations for
the Nine Months Ended June 30, 2012 and 2011, respectively, under the caption “Change in fair value of derivative warrant liability”. The fair
value of the warrants at June 30, 2012 is $4,523,086 which is reported on the consolidated balance sheet under the caption “Derivative
Liability”. The following summarizes the changes in the value of the derivative warrant liability from the date of the Company’s issuance of
derivative warrant instruments on November 23, 2011 until June 30, 2012:


                                                                      F- 14
                                              ICEWEB, INC. AND SUBSIDIARIES
                                 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                                        June 30, 2012

 NOTE 10 - DERIVATIVE LIABILITIES (continued)

                                                                                                    Value              No. of Warrants
       Warrants Issued on November 23, 2011– Derivative warrant liability                       $   1,750,000                 81,588,029
       Increase in fair value of derivative warrant liability                                       2,773,086                         n/a
       Additional warrants from price protection features of existing warrants
       Balance at June 30, 2012 – Derivative warrant liability                                  $    4,523,086                81,588,029

Fair Value Assumptions Used in Accounting for Derivative Warrant Liability

The Company has determined its derivative warrant liability to be a Level 3 fair value measurement and has used the Black-Scholes pricing
model to calculate the fair value as of June 30, 2012. The Black-Scholes model requires six basic data inputs: the exercise or strike price, time
to expiration, the risk free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend
rate. Because the warrants contain the price protection feature, the probability that the exercise price of the warrants would decrease as the
stock price decreased was incorporated into the valuation calculations. The key inputs used in the June 30, 2012 fair value calculations were as
follows:

                                                                                                        June 30,
                                                                                                          2012
                             Exercise price                                                             $ 0.074
                                                                                                            0.4 –
                                                                                                             4.40
                             Time to expiration                                                             years
                                                                                                         0.21% –
                             Risk-free interest rate                                                         0.67 %
                             Estimated volatility                                                             274 %
                             Dividend                                                                          -0-
                             Stock price on June 30, 2012                                               $ 0.135
                             Expected forfeiture rate                                                           50 %

NOTE 11 - COMMITMENTS

We are on a month to month tenancy in our office space in Sterling, Virginia, as our two-year operating lease expired on March 31, 2011. The
office lease agreement had certain escalation clauses and renewal options. We currently have no future minimum rental payments under
operating leases.


                                                                     F- 15
                                               ICEWEB, INC. AND SUBSIDIARIES
                                  NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                                         June 30, 2012


NOTE 12 – STOCKHOLDERS’ DEFICIT

Common Stock Warrants

The outstanding warrants at June 30, 2012 have a weighted average exercise price of $0.084 per share and have a weighted average remaining
life of 3.59 years.

Certain of these warrants contain provisions which cause them to be classified as derivative liabilities pursuant to Accounting Standards
Codification subtopic 815-40, “Derivatives and hedging—Contracts in Entity’s Own Equity” (ASC 815-40). Accordingly, upon issuance the
warrants were recorded as a derivative liability and valued at a fair market value of $1,750,000 which also reduced the carrying value of the
convertible notes payable. As a result of the sale of restricted stock units in June, 2012, the price protection provisions of these certain warrants
were triggered and resulted in an adjustment to the conversion price of the warrants from $0.17/share to $0.074/share, and simultaneously a
commensurate adjustment to the number of shares covered by the warrants was made. A total of 46,679,584 additional shares were issued as a
result of the ratchet provisions. The fair value of these warrants was increased to $4,523,086 as of June 30, 2012. The non-cash expense
adjustment recorded in the Statement of Operations for the Nine Months Ended June 30, 2012 was approximately $2,773,086. We are required
to continue to adjust the warrants to fair value through current period operations for each reporting period.

The Company’s issuance of the following securities will not trigger the price protection provisions of the warrants described above that were
issued in connection with the November 2011 private placement: (a) shares of common stock or standard options to the Company’s directors,
officers, employees or consultants pursuant to a board-approved equity compensation program or other contract or arrangement; (b) shares of
common stock issued upon the conversion or exercise of any security, right or other instrument convertible or exchangeable into common stock
(or securities exchangeable into common stock) issued prior to November 23, 2011; and (c) shares of common stock and warrants in
connection with strategic alliances, acquisitions, mergers, and strategic partnerships, the primary purpose of which is not to raise capital, and
which are approved in good faith by the Company’s board of directors.

A summary of the status of the Company’s outstanding common stock warrants as of June 30, 2012 and changes during the period ending on
that date is as follows:

                                                                                                         Number of             Weighted Average
                                                                                                         Warrants               Exercise Price
Common Stock Warrants
Balance at beginning of year                                                                                11,528,934     $                 0.170
Granted                                                                                                     84,106,138                       0.074
Exercised                                                                                                     (838,000 )                     0.122
Forfeited                                                                                                            0                          —
Balance at end of period                                                                                    94,797,072                        0.84


Warrants exercisable at end of period                                                                       94,797,072     $                 0.084


Weighted average fair value of warrants granted or re-priced during the period                                             $                   .074



                                                                       F- 16
                                             ICEWEB, INC. AND SUBSIDIARIES
                                NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                                       June 30, 2012

NOTE 12 – STOCKHOLDERS’ DEFICIT (continued)

The following table summarizes information about common stock warrants outstanding at June 30, 2012:

                                          Warrants Outstanding                                            Warrants Exercisable
                           Number                Weighted
                          Outstanding            Average                    Weighted                 Number                   Weighted
    Range of                   at               Remaining                   Average                Exercisable at             Average
    Exercise               June 30,            Contractual                  Exercise                 June 30,                 Exercise
     Price                   2012                   Life                     Price                     2012                    Price
$            0.074             83,768,138             3.19 Years        $            0.074                83,768,138      $           0.074
$             0.15             10,738,934             4.25 Years        $            0.150                10,738,934      $           0.150
$             0.50                290,000             1.28 Years        $            0.500                   290,000      $           0.500
                               94,797,072                               $            0.084                94,797,072      $           0.084


NOTE 13 - STOCK OPTION PLAN

In August 2000, the Board of directors adopted the 2000 Management and Director Equity Incentive and Compensation Plan (the “Plan”) for
directors, officers and employees that provides for non-qualified and incentive stock options to be issued enabling holders thereof to purchase
common shares of the Company at exercise prices determined by the Company’s Board of directors. The Plan was approved by the Company’s
stockholders in August 2001.

The purpose of the Plan is to advance the Company’s interests and those of its stockholders by providing a means of attracting and retaining
key employees, directors and consultants. In order to serve this purpose, the Company believes the Plan encourages and enables key
employees, directors and consultants to participate in its future prosperity and growth by providing them with incentives and compensation
based on its performance, development and financial success. Participants in the Plan may include the Company’s officers, directors, other key
employees and consultants who have responsibilities affecting our management, development or financial success.


                                                                    F- 17
                                              ICEWEB, INC. AND SUBSIDIARIES
                                 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                                        June 30, 2012

NOTE 13 - STOCK OPTION PLAN (continued)

Awards may be made under the Plan in the form of Plan options, shares of the Company’s common stock subject to a vesting schedule based
upon certain performance objectives (“Performance Shares”) and shares subject to a vesting schedule based on the recipient’s continued
employment (“restricted shares”). Plan options may either be options qualifying as incentive stock options under Section 422 of the Internal
Revenue Code of 1986, as amended or options that do not so qualify. Any incentive stock option granted under the Plan must provide for an
exercise price of not less than 100% of the fair market value of the underlying shares on the date of such grant, but the exercise price of any
incentive option granted to an eligible employee owning more than 10% of our common stock must be at least 110% of such fair market value
as determined on the date of the grant. Only persons who are officers or other key employees are eligible to receive incentive stock options and
performance share grants. Any non-qualified stock option granted under the Plan must provide for an exercise price of not less than 50% of the
fair market value of the underlying shares on the date of such grant.

As amended in October, 2010, the Plan permits the grant of options and shares for up to 60,000,000 shares of the Company’s common stock.
The Plan terminates 10 years from the date of the Plan’s adoption by the Company’s stockholders.

The term of each Plan option and the manner in which it may be exercised is determined by the Board of directors, provided that no Plan option
may be exercisable more than three years after the date of its grant and, in the case of an incentive option granted to an eligible employee
owning more than 10% of the Company’s common stock, no more than five years after the date of the grant. The exercise price of the stock
options may be paid in either cash, or delivery of unrestricted shares of common stock having a fair market value on the date of delivery equal
to the exercise price, or surrender of shares of common stock subject to the stock option which has a fair market value equal to the total
exercise price at the time of exercise, or a combination of the foregoing methods.

The fair value of stock options granted was estimated at the date of grant using the Black-Scholes options pricing model. The Company used
the following assumptions for determining the fair value of options granted under the Black-Scholes option pricing model:

                                                                                                           June 30,
                                                                                                    2012                2011
              Expected volatility                                                                          N/A        323% - 325 %
              Expected term                                                                                N/A         1 - 5 Years
              Risk-free interest rate                                                                      N/A                0.03 %
              Forfeiture Rate                                                                              N/A             0% - 45 %
              Expected dividend yield                                                                      N/A                   0%

The expected volatility was determined with reference to the historical volatility of the Company’s stock. The Company uses historical data to
estimate option exercise and employee termination within the valuation model. The expected term of options granted represents the period of
time that options granted are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option is based
on the U.S. Treasury rate in effect at the time of grant.

For the Nine Months Ended June 30, 2012, total stock-based compensation charged to operations for option-based arrangements amounted to
$29,615. At June 30, 2012, there was approximately $23,138 of total unrecognized compensation expense related to non-vested option-based
compensation arrangements under the Plan.


                                                                      F- 18
                                             ICEWEB, INC. AND SUBSIDIARIES
                                NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                                       June 30, 2012

NOTE 13 - STOCK OPTION PLAN (continued)

A summary of the status of the Company’s outstanding stock options as of June 30, 2012 and changes during the period ending on that date is
as follows:

                                                                                                   Number of             Weighted Average
                                                                                                    Options               Exercise Price
Stock options
Balance at beginning of year                                                                           4,104,487     $                    0.37
Granted                                                                                                       —                             —
Exercised                                                                                               (532,325 )                        0.34
Forfeited                                                                                             (1,448,162 )                        0.53
Balance at end of period                                                                               2,124,000     $                    0.38


Options exercisable at end of period                                                                    2,086,500    $                    0.29


Weighted average fair value of options granted during the year                                                       $                     —


The following table summarizes information about employee stock options outstanding at June 30, 2012:

                                            Options Outstanding                                           Options Exercisable
                           Number                 Weighted
                          Outstanding             Average                  Weighted                Number                      Weighted
    Range of                   at                Remaining                 Average               Exercisable at                Average
    Exercise               June 30,              Contractual               Exercise                June 30,                    Exercise
     Price                   2012                    Life                   Price                    2012                       Price
$      0.001-0.15               1,249,000              1.34 Years      $              0.06               1,211,500         $              0.06
        0.17-0.41                  25,000              0.72 Years                     0.27                  25,000                        0.37
        0.55-0.70                 850,000              0.19 Years                     0.61                 850,000                        0.60
                                2,124,000                              $              0.38               2,086,500         $              0.29


NOTE 14 - SEGMENT REPORTING

Although the Company has a number of operating divisions, separate segment data has not been presented as they meet the criteria for
aggregation as permitted by ASC Topic 280, “Segment Reporting” (formerly Statement of Financial Accounting Standards (SFAS) No. 131,
“Disclosures About Segments of an Enterprise and Related Information”).

Our chief operating decision-maker is considered to be our Chief Executive Officer (CEO). The CEO reviews financial information presented
on a consolidated basis for purposes of making operating decisions and assessing financial performance. The financial information reviewed by
the CEO is identical to the information presented in the accompanying consolidated statements of operations. Therefore, the Company has
determined that it operates in a single operating segment, specifically, web communications services. For the periods ended June 30, 2012 and
2011 all material assets and revenues of the Company were in the United States.

NOTE 15 - SUBSEQUENT EVENTS

During the month of July, 2012 our convertible note holders converted $609, 606 of their notes balance into 8,560,944 of our common stock. In
addition we sold 2,860,125 common stock units as part of a PIPE transaction that closed in July, 2012, and we had warrants exercised into
675,000 of our common stock in July, 2012. Other than the disclosures shown, management did not identify any events or transactions that
should be recognized or disclosed in the accompanying financial statements.


                                                                   F- 19
                              REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of directors
IceWEB, Inc.

We have audited the accompanying consolidated balance sheets of IceWEB, Inc. and Subsidiaries as of September 30, 2011 and 2010 and the
related consolidated statements of operations, changes in stockholders’ equity (deficit) and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these
consolidated 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 audit to obtain reasonable assurance about whether the consolidated 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 audit 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 purposes of expressing an opinion on the effectiveness of our internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position
of IceWEB, Inc. and Subsidiaries, as of September 30, 2011 and September 30, 2010 and the consolidated results of their operations and their
cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As
discussed in Note 2 to the consolidated financial statements, the Company had net losses of $4,705,291 and $6,964,233 respectively, for the
years ended September 30, 2011 and 2010. These matters raise substantial doubt about the Company’s ability to continue as a going concern.
Management’s plans in regards to these matters are also described in Note 2. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

                                                                                         /s/ Sherb & Co., LLP
                                                                                         Certified Public Accountants

Boca Raton, Florida
December 22, 2011


                                                                       F- 20
                                                         IceWEB, Inc. and Subsidiaries
                                                          Consolidated Balance Sheets

                                                                                                         September 30,           September 30,
                                                                                                             2011                    2010
CURRENT ASSETS:
Cash                                                                                                 $             4,120     $           540,156
Subscription receivable                                                                                        1,171,520                       -
Accounts receivable, net of allowance for doubtful accounts of $409,000                                        1,182,060               1,466,483
Inventory, net                                                                                                    55,981                  62,197
Other current assets                                                                                               6,877                   6,875
Prepaid expenses                                                                                                  30,248                  31,230
                                                                                                               2,450,806               2,106,941

OTHER ASSETS:
Property and equipment, net of accumulated depreciation of $2,483,440 and $2,180,643,
respectively                                                                                                     252,835                 418,873
Deposits                                                                                                          13,320                  13,320
Marketable Securities, net                                                                                       115,200                 524,800
Intangible assets, net of accumulated amortization of $911,591 and $668,498, respectively                              -                 546,952
Total Assets                                                                                         $         2,832,161     $         3,610,886


CURRENT LIABILITIES:
Accounts payable and accrued liabilities                                                             $         2,186,691     $         1,648,252
Notes payable                                                                                                  1,972,544               1,649,140
Deferred revenue                                                                                                   4,904                  59,582
Total Current Liabilities                                                                                      4,164,139               3,356,974

Stockholders’ Equity (Deficit)
Series B convertible preferred stock ($.001 par value; 626,667 shares issued and outstanding)                        626                     626
Common stock ($.001 par value; 1,000,000,000 shares authorized; 157,959,066 shares issued and
134,443,725 shares outstanding, respectively)                                                                    157,961                 134,445
Additional paid in capital                                                                                    32,866,315              29,360,833
Accumulated deficit                                                                                          (34,328,080 )           (29,622,792 )
Accumulated other comprehensive income                                                                            67,200                 476,800
Subscription receivable                                                                                          (83,000 )               (83,000 )
Treasury stock, at cost, (162,500 shares)                                                                        (13,000 )               (13,000 )

Total stockholders’ equity (deficit)                                                                          (1,331,978 )              253,912

Total Liabilities and stockholders’ Equity (Deficit)                                                 $         2,832,161     $         3,610,886


                                           See accompanying notes to consolidated financial statements


                                                                     F- 21
                                                      IceWEB, Inc. and Subsidiaries
                                                   Consolidated Statements of Operations

                                                                                                              For the Year Ended
                                                                                                                 September 30,
                                                                                                             2011              2010

Sales                                                                                                   $     2,678,346     $     3,353,286

Cost of sales                                                                                                 1,751,640           1,742,110

Gross profit                                                                                                   926,706            1,611,176

Operating expenses:
Sales and marketing expense                                                                                     975,282           1,690,684
Depreciation and amortization expense                                                                           545,890             662,003
Research and development                                                                                        790,048             547,364
General and administrative                                                                                    2,605,999           5,312,247
Loss on impairment of intangible assets                                                                         303,859                   -

Total operating expenses                                                                                      5,221,078           8,212,298

Loss From Operations                                                                                         (4,294,372 )        (6,601,122 )

Other income (expenses):
Gain on extinguishment of debt                                                                                        -             190,136
Interest expense                                                                                               (410,919 )          (553,247 )

Total other income (expenses):                                                                                 (410,919 )          (363,111 )

Net loss                                                                                                $    (4,705,291 )   $    (6,964,233 )


Net loss per common share - basic and diluted                                                           $         (0.03 )   $         (0.07 )

Weighted average common shares outstanding - basic and diluted                                              142,344,070         101,379,729

                                          See accompanying notes to consolidated financial statements


                                                                    F- 22
                                                                  IceWEB, Inc. and Subsidiaries
                                                Consolidated Statement of Changes in Stockholders’ Equity (Deficit)
                                                         For the years ended September 30, 2011 and 2009

                           Series B                                        Additional
                       Preferred Stock              Common Stock           Paid-In          Accumulated         Comprehensive     Subscription             Treasury Stock
                    Shares          Amount   Shares           Amount       Capital          Deficit             Income            Receivable          Share          Amount           Total

Balance at
September 30,
2009                   626,667         626       68,469,617      68,471        20,065,001       (22,658,556 )               —                    —       (162,500 )       (13,000 )       (2,537,458 )

Amortization of
deferred
compensation                —           —               —              —        1,627,919                 —                 —                    —             —               —              1,627,919

Issuance of
common stock for
cash                        —           —        15,580,000      15,580         2,365,050                 —                 —                    —             —               —              2,380,630

Issuance of
common stock to
settle litigation           —           —         2,678,571       2,679          399,104                  —                 —                    —             —               —               401,783

Common stock
issued for
exercise of
options                     —           —        30,570,600      30,571         2,561,055                 —                 —                    —             —               —              2,591,626

Common stock
issued in
connection with
subscription
receivable                  —           —         2,000,000       2,000            81,000                 —                 —             (83,000 )            —               —                    —

Common stock
issued for
services                    —           —         2,800,000       2,800          506,684                  —                 —                    —             —               —               509,484

Common stock
issued to
employees                   —           —         9,344,937       9,345          858,020                  —                 —                    —             —               —               867,365

Common stock
issued in
connection with
conversion of
convertible
debenture                   —           —         3,000,000       3,000          897,000                  —                 —                    —             —               —               900,000

Other
Comprehensive
income                      —           —               —              —                —                 —             476,800                  —             —               —               476,800

Net loss for the
year                        —           —               —              —                —        (6,964,233 )               —                    —             —               —          (6,964,233 )

Net
Comprehensive
loss                        —           —               —              —                —        (6,964,233 )           476,800                  —             —               —          (6,487,433 )

Balance at
September 30,
2010                   626,667    $    626      134,443,725   $ 134,445    $   29,360,833   $   (29,622,789 )   $       476,800   $       (83,000 )      (162,500 )   $   (13,000 )   $        253,912

Amortization of
deferred
compensation                —           —               —              —         131,680                  —                 —                    —             —               —               131,680

Issuance of
common stock for
cash                        —           —        14,053,334      14,054         1,445,578                 —                 —                    —             —               —              1,459,632

Common stock
issued for
services                    —           —         1,032,544       1,033          228,937                  —                 —                    —             —               —               229,970

Common stock
issued to
employees                   —           —         2,113,101       2,113          430,502                  —                 —                    —             —               —               432,615

Common stock                —           —         6,791,361       6,791         1,268,310                 —                 —                    —             —               —              1,275,101
issued for
exercise of
options

Cancellation of
shares                                    (475,000 )        (475 )             475                                                                                                  —

Other
Comprehensive
income                 —         —              —             —                 —                  —          (409,600 )            —            —               —           (409,600 )

Net loss for the
year                   —         —              —             —                 —          (4,705,291 )             —               —            —               —          (4,705,291 )

Net
Comprehensive
loss                   —         —              —             —                 —          (4,705,291 )       (409,600 )            —            —               —          (5,114,891 )

Balance at
September 30,
2011               626,667   $   626   157,959,066     $ 157,960     $   32,866,315   $   (34,328,080 )   $     67,200     $   (83,000 )   (162,500 )   $   (13,000 )   $   (1,331,978 )


                                               See accompanying notes to consolidated financial statements


                                                                                      F- 23
                                                       IceWEB, Inc. and Subsidiaries
                                                    Consolidated Statements of Cash Flows

                                                                                                 For the Year Ended
                                                                                                   September 30,
                                                                                                2011             2010

Net loss                                                                                    $   (4,705,291 )   $   (6,964,233 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization                                                                     545,890            662,003
Loss on impairment of intangible assets                                                           303,859                 —
Share-based compensation                                                                          369,385            867,365
Amortization of deferred compensation                                                             131,680          1,627,919
Gain on sale of discontinued operations                                                                —                  —
Common stock issued for services rendered                                                         293,199            509,484
Common stock issued for settlement                                                                     —             401,783
Amortization of deferred finance costs                                                             27,500             27,015
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable                                                                               284,423          (1,104,934 )
Prepaid expense                                                                                       982             (33,545 )
Other                                                                                             (27,499 )
Inventory                                                                                           6,216              89,164
Deposits                                                                                               —                   —
Increase (decrease) in:
Accounts payable and accrued liabilities                                                          538,441           (259,757 )
Deferred revenue                                                                                  (54,678 )           49,321

NET CASH USED IN OPERATING ACTIVITIES                                                           (2,285,893 )       (4,128,415 )

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment                                                               (136,759 )           (85,624 )
Investment in marketable securities                                                                    —              (48,000 )

NET CASH USED IN INVESTING ACTIVITIES                                                            (136,759 )         (133,624 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable                                                                       836,024           1,602,024
Payments on notes payable                                                                        (512,621 )        (1,835,395 )
Proceeds from sale of common stock                                                                288,111           2,380,630
Proceeds from exercise of common stock options                                                  1,275,102           2,591,626

NET CASH PROVIDED BY FINANCING ACTIVITIES                                                       1,886,616          4,738,885

NET INCREASE (DECREASE) IN CASH                                                                  (536,036 )          476,846

CASH - beginning of period                                                                        540,156              63,310

CASH - end of period                                                                        $        4,120     $     540,156


Supplemental disclosure of cash flow information:
Cash paid for:
Interest                                                                                    $     383,419      $     526,232
Income taxes                                                                                $           —      $           —


NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued for debt and interest                                                            $   —   $         —
Common stock issued in connection with convertible debenture                                         $   —   $   1,090,136
Common stock issued in connection with acquisition/disposition                                       $       $


                                       See accompanying notes to consolidated financial statements


                                                                 F- 24
                                                   IceWEB, Inc. and Subsidiaries
                                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                              Years ended September 30, 2011 and 2010

NOTE 1 - ORGANIZATION

IceWEB, Inc. (the “Company”) began trading publicly in April 2002. Utilizing resources gained through acquisitions, we have developed two
lines of business, IceWEB Storage products, and IceMAIL which is a hosted Microsoft Exchange application service. We currently have two
wholly owned operating subsidiaries: IceWEB Storage Corporation (formerly known as Inline Corporation), and IceWEB Online, Inc.

BUSINESS OF ICEWEB

Since 2005, the Company has been focused on serving the commercial and federal markets with network security products and proprietary
on-line software solutions. In 2008, the Company narrowed its focus and expanded its capabilities by acquiring INLINE Corporation, a data
storage manufacturing company.

In March, 2009, the Company sold its wholly owned subsidiary, IceWEB Virginia, Inc. to an unrelated third party, and in the process exited its
low-margin IT re-seller business products business to further focus on the higher margin data storage manufacturing business.

At the close of fiscal year 2011, the Company has three key product offerings:

•    Unified Network Storage Solutions
•    Purpose Built Network/Data Appliances
•    Cloud Computing Products/Services

NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accounting
principles and include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances
have been eliminated in consolidation.

Reclassifications

Certain reclassifications have been made to previously reported amounts to conform to 2010 amounts. The reclassifications had no impact on
previously reported results of operations or shareholders’ deficit.

Going Concern

Our auditors stated in their report on the consolidated financial statements of the Company for the Years ended September 30, 2011 and 2010
that we have had losses since inception that raise doubt about our ability to continue as a going concern. In addition and as discussed further in
Note 6, we are not in compliance with debt covenants under our Financing Agreements with Sand Hill Finance LLC. For the year ended
September 30, 2011 we incurred a net loss of $4,705,291. The consolidated financial statements do not include any adjustments related to the
recovery and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event we cannot
continue in existence.

Management has established plans intended to increase the sales of our products and services. Management intends to seek new capital from
new equity securities offerings to provide funds needed to increase liquidity, fund growth, and implement its business plan. However, no
assurances can be given that we will be able to raise any additional funds.


                                                                      F- 25
                                                     IceWEB, Inc. and Subsidiaries
                                         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                Years ended September 30, 2011 and 2010



NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Marketable Securities

IceWEB accounts for the purchase of marketable equity securities in accordance with ASC 320, “Investment – Debt and Equity Securities”
with any unrealized gains and losses included as a net amount as a separate component of stockholders’ equity. However, those securities may
not have the trading volume to support the stock price if the Company were to sell all their shares in the open market at once, so the Company
may have a loss on the sale of marketable securities even though they record marketable equity securities at the current market value.

Use of Estimates

The preparation of financial statements in accordance 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 of the balance sheets and the reported amounts of sales and expenses during the reporting periods. Actual results could
differ from those estimates. Significant estimates in 2011 and 2010 include the allowance for doubtful accounts, the valuation of stock-based
compensation, the allowance for inventory obsolescence and the useful life of property and equipment and intangible assets, and litigation
reserves.

Cash and Cash Equivalents

We consider all highly liquid debt instruments with original maturities of three months or less to be cash equivalents.

Accounts Receivable

Accounts receivable consists of normal trade receivables. We recorded a bad debt allowance of $409,000 as of September 30, 2011.
Management performs ongoing evaluations of its accounts receivable. Management believes that all remaining receivables are fully collectable.
Bad debt expense amounted to $102,076 and $336,568 for the Years ended September 30, 2011 and 2010, respectively.

Inventory

Inventory is valued at the lower of cost or market, on an average cost basis.

Property and Equipment

Property and equipment is stated at cost, net of accumulated depreciation. Depreciation expense is recorded by using the straight-line method
over the estimated useful lives of the related assets.

Intangible Assets

Intangible assets, net consists of the cost of acquired customer relationships. We capitalize and amortize the cost of acquired intangible assets
over their estimated useful lives on a straight-line basis. The Company periodically reevaluates the carrying value of its intangible assets for
events or changes in circumstances that indicate that the carrying value may not be recoverable. As part of this reevaluation, the Company
estimates the future cash flows expected to result from the use of the asset. If the sum of the expected future cash flows is less than the carrying
amount of the asset, an impairment loss is recognized to reduce the carrying value of the intangible asset to the estimated fair value of the asset.

Long-lived Assets

In accordance with ASC Topic 360, “Property, Plant, and Equipment” (formerly SFAS 144, “Accounting for the Impairment or Disposal of
Long-Lived Assets”), we review the carrying value of intangibles and other long-lived assets for impairment at least annually or whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is
measured by comparison of its carrying amount to the undiscounted cash flows that the asset or asset group is expected to generate. If such
assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property,
if any, exceeds its fair market value.


                                                                      F- 26
                                                     IceWEB, Inc. and Subsidiaries
                                         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                Years ended September 30, 2011 and 2010



NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Advertising

Advertising costs are expensed as incurred and amounted to $238,482 in fiscal 2011 and $162,862 in fiscal 2010.

Revenue Recognition

We follow the guidance of Accounting Standards Codification (ASC) Topic 605, “Revenue Recognition” (formerly Staff Accounting Bulletin
(SAB) No. 104, “Revenue Recognition”) for revenue recognition. In general, we record revenue when persuasive evidence of an arrangement
exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability
is reasonably assured. The following policies reflect specific criteria for our various revenues streams:

Revenues from sales of products are generally recognized when products are shipped unless the Company has obligations remaining under
sales or licensing agreements, in which case revenue is either deferred until all obligations are satisfied or recognized ratably over the term of
the contract.

Revenue from services is recorded as it is earned. Commissions earned on third party sales are recorded in the month in which contracts are
awarded. Customers are generally billed every two weeks based on the units of production for the project. Each project has an estimated total
which is based on the estimated units of production and agreed upon billing rates. Amounts billed in advance of services being provided are
recorded as deferred revenues and recognized in the consolidated statement of operations as services are provided.

Earnings per Share

We compute earnings per share in accordance with ASC Topic 260, “Earnings Per Share” (formerly SFAS No. 128, “Earnings per Share”)
Under the provisions of ASC Topic 260, basic earnings per share is computed by dividing the net income (loss) for the period by the weighted
average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing the net income (loss) for
the period by the weighted average number of common and potentially dilutive common shares outstanding during the period. Potentially
dilutive common shares consist of the common shares issuable upon the exercise of stock options and warrants (using the treasury stock
method) and upon the conversion of convertible preferred stock (using the if-converted method). Potentially dilutive common shares are
excluded from the calculation if their effect is antidilutive. At September 30, 2011, there were options and warrants to purchase 15,633,425
shares of common stock, 626,667 shares issuable upon conversion of Series B preferred stock, and no shares of Series C preferred stock
outstanding which could potentially dilute future earnings per share.

Stock-Based Compensation

As more fully described in Note 12, we have a stock option plan that provides for non-qualified and incentive stock options to be issued to
directors, officers, employees and consultants (the 2000 Management and Director Equity Incentive and Compensation Plan (the “Plan”).

Prior to October 1, 2005, we accounted for stock options issued under the Plan under the recognition and measurement provisions of APB
Opinion No. 25, Accounting for Stock Issued to Employees , and related interpretations, as permitted by ASC Topic 718, “Compensation –
Stock Compensation (Formerly SFAS No. 123 (R), “Share-Based Payments. No stock-based compensation cost related to employee stock
options was recognized in the Consolidated Statement of Operations for the year ended September 30, 2005 as all options granted under the
Plan had an exercise price equal to the market value of the underlying common stock on the date of grant.

Effective October 1, 2005, we adopted the fair value recognition provisions of ASC Topic 718, “Compensation – Stock Compensation
(Formerly SFAS No. 123 (R), “Share-Based Payments using the modified-prospective-transition method. Under that transition method,
compensation cost recognized in the year ended September 30, 2006 includes: (a) compensation cost for all share-based payments granted prior
to, but not yet vested as of September 30, 2005, based on the grant date fair value estimated in accordance with the original provisions of
Statement 123, and (b) compensation cost for all share-based payments granted subsequent to October 1, 2005, based on the grant-date fair
value estimated in accordance with the provisions of Statement 123(R). Financial results for the year ended September 30, 2005 have not been
restated.


                                                                      F- 27
                                                     IceWEB, Inc. and Subsidiaries
                                         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                Years ended September 30, 2011 and 2010



NOTE 3 - PROPERTY AND EQUIPMENT

At September 30, property and equipment consisted of the following:

                                                                                       Estimated
                                                                                          Life                  2011                    2010
         Office equipment                                                                  5 years      $         836,041       $         699,282
         Computer software                                                                 3 years                612,379                 612,379
         Furniture and fixtures                                                            5 years                261,385                 261,385
         Leasehold improvements                                                            5 years              1,026,470               1,026,470
                                                                                                                2,736,275               2,599,516

         Less: accumulated depreciation                                                                         (2,483,440 )            (2,180,643 )

                                                                                                        $         252,835       $         418,873


Depreciation expense for the years ended September 30, 2011 and 2010 was $302,797 and $418,913 respectively.

NOTE 4 - INTANGIBLE ASSETS

At September 30, intangible assets consist of the following:

                                                                                                                  2011                  2010
         Manufacturing GSA Schedule                                                                         $               -       $     750,000
         Customer relationships intangible                                                                                  -             465,452
                                                                                                                            -           1,215,452
         Less: accumulated amortization                                                                                     -            (668,500 )

                                                                                                            $               -       $     546,952


Amortization expense amounted to $243,093 for the year ended September 30, 2011, and $243,090 for the year ended September 30, 2010.

Amortization expense subsequent to the year ended September 30, 2011 is $0.

The Company periodically reevaluates the carrying value of its intangible assets for events or changes in circumstances that indicate that the
carrying value may not be recoverable. As part of this reevaluation, the Company estimates the future cash flows expected to result from the
use of the asset. If the sum of the expected future cash flows is less than the carrying amount of the asset, an impairment loss is recognized to
reduce the carrying value of the intangible asset to the estimated fair value of the asset.

At September 30, 2011, the Company determined that its sales model in future periods would not substantially benefit from the customer
relations or manufacturing GSA schedules that we own. Accordingly, management deemed these intangible assets to be fully impaired at
September 30, 2011 and reduced their carrying values to zero. A loss on impairment of $303,859 has been included in operating expenses.


                                                                      F- 28
                                                      IceWEB, Inc. and Subsidiaries
                                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                 Years ended September 30, 2011 and 2010



NOTE 5 - RELATED PARTY TRANSACTIONS

During October, 2009, we sold 2,000,000 shares of common stock at a per share price of $0.042, valued at $83,000 to Florence Signorello, an
accredited investor who is the mother of John Signorello, our chief executive officer. The fair market value of our common stock on the date of
the transaction was $0.145 per share. As of September 30, 2011 we had not received the proceeds from the investor and as a result we recorded
the subscription receivable as a contra equity account on our balance sheet.

We and certain of our affiliates have entered into a series of transactions involving VOIS Inc. (OTCBB: VOIS), a public company which had
developed and launched a social commerce website. On November 3, 2009 we purchased 800,000 shares of the common stock of VOIS Inc.,
which represented approximately 16% of that company, for $48,000 in a private transaction exempt from registration under the Securities Act
of 1933 in reliance on an exemption provided by Section 4(2) of that act resulting in gross proceeds to us of $48,000. At the time of our
investment, Mr. Mark Lucky, our Chief Financial Officer, was a member of VOIS’ board of directors, having been elected in October
2009. Mr. Lucky resigned his positions with VOIS in September 2010.
Prior to our investment in VOIS, both Mr. John R. Signorello had a personal relationship with the founders of VOIS. In an unrelated
transaction in November 2009 Mr. Signorello, a member of our board of directors and our CEO, purchased 1,125,000 shares of VOIS’ common
stock from a former officer and director of VOIS for nominal consideration in a private transaction. The shares of common stock purchased by
Mr. Signorello represented approximately 27% of VOIS’ outstanding common stock at the time of the purchase of the shares by us.

While five out of the 6 board members qualify as unrelated and independent, as they are independent from management and free from any
interest, function, business or other relationship that could, or could reasonably be perceived to, materially interfere with the Director’s ability
to act in the our best interest, we do not have any policies or procedures for the review, approval or ratification of any related party transactions
and no review or ratification of any of the foregoing related party truncations by our board has occurred.

NOTE 6 - NOTES PAYABLE

Sand Hill Finance, LLC

On December 19, 2005, we entered into a Financing Agreement with Sand Hill Finance, LLC pursuant to which, together with related
amendments, we may borrow up to 80% on our accounts receivable balances up to a maximum of $1,800,000. In conjunction with the
acquisition of Inline Corporation in December, 2007, the lending limit on the credit facility was increased to $2,750,000.


                                                                       F- 29
                                                     IceWEB, Inc. and Subsidiaries
                                         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                Years ended September 30, 2011 and 2010



NOTE 6 - NOTES PAYABLE (continued)

In addition, in November, 2008 we and Sand Hill Finance, LLC entered into a 36 month term convertible debenture agreement in the amount of
$1,000,000. On September 7, 2010, Sand Hill Finance, LLC converted the remaining balance of $1,090,136 of this convertible debenture in
exchange for three million shares of our common stock. The debenture was converted at a price of $0.36338 per share. The conversion price
was subject to a floor of $0.30 per share resulting in a gain on conversion of $190,136.

Amounts borrowed under the Financing Agreement are secured by a first security interest in substantially all of our assets. At September 30,
2011, the principal amount due under the Financing Agreement amounted to $1,972,544. This amount is included in the note payable balance
of $1,972,544 on the balance sheet at September 30, 2011.

Interest is payable under the Financing Agreement at a rate of 1.75% per month on the average loan balance outstanding during the year, equal
to an annual interest of approximately 21% per year. We also agreed to pay an upfront commitment fee of 1% of the credit line upon
signing the Financing Agreement, half of which was due and paid upon signing (amounting to $9,000) and half of which is due on the first
anniversary of the Financing Agreement. In addition, we are obligated to pay a commitment fee of 1% of the credit limit annually, such
amounts are payable on the anniversary of the agreement.

In connection with the Financing Agreement, we issued Sand Hill Finance, LLC, a seven-year common stock purchase warrant to purchase
25,000 shares of our common stock at an exercise price of $0.50 per share. The warrant contains a cashless exercise provision which means
that at the option of the holder, the warrant is convertible into a number of shares of our common stock as determined by dividing the aggregate
fair market value of our common stock minus the aggregate exercise price of the warrant by the fair market value of one share of common
stock. The number of shares issuable upon the exercise of the warrant and the exercise price are subject to adjustment in the event of stock
dividends, stock splits and reclassifications. The fair value of the warrant of $16,250 has been recorded as an addition to paid-in capital and
interest expense during the year ended September 30, 2007.

In connection with the term loan, we issued Sand Hill Finance, LLC a seven-year common stock purchase warrant to purchase 120,000 shares
of our common stock at an exercise prices $0.50 per share. The warrant contains a cashless exercise provision which means that at the option of
the holder, the warrant is convertible into a number of shares of our common stock as determined by dividing the aggregate fair market value of
our common stock minus the aggregate exercise price of the warrant by the fair market value of one share of common stock. The number of
shares issuable upon the exercise of the warrant and the exercise price are subject to adjustment in the event of stock dividends, stock splits and
reclassifications. The fair value of the warrant of $13,587 has been recorded as an addition to paid-in capital and deferred finance costs during
the year ended September 30, 2010.

The Financing Agreement has a term of one year, subject to mutual extension by both parties. As a result, the balance due to Sand Hill Finance,
LLC is classified as a current liability on the accompanying consolidated balance sheet.

The terms of the Financing Agreement also restricts us from undertaking certain transactions without the written consent of the creditor
including (i) permit or suffer a change in control involving 20% of its securities, (ii) acquire assets, except in the ordinary course of business,
involving payment of $100,000 or more, (iii) sell, lease, or transfer any of its property except for sales of inventory and equipment in the
ordinary course of business, (iv) transfer, sell or license any intellectual property, (v) declare or pay a dividend on stock, except payable in the
form of stock dividends (vi) incur any indebtedness other than trade credit in the ordinary course of business and (vii) permit any lien or
security interest to attach to any collateral. Sand Hill Finance provided a waiver with respect to our disposition of IceWEB, Virginia, Inc. in
March, 2010, as discussed herein. In addition, we have been in default under the terms of the Financing Agreement, however Sand Hill Finance
has provided a waiver and forbearance agreement that provides that no obligations under the financing agreement shall become due and
payable until the 91st day after the obligations under the convertible notes (as discussed in Note 17 - Subsequent Events) have been satisfied.
Sand Hill Finance agreed that no remedies available to them under the Financing Agreement (including foreclosure) will be pursued until after
such date.


                                                                      F- 30
                                                      IceWEB, Inc. and Subsidiaries
                                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                 Years ended September 30, 2011 and 2010



NOTE 7 - INVENTORY

Inventory consisted of the following:

                                                                                              September 30,           September 30,
                                                                                                  2011                    2010
         Raw materials                                                                      $          44,785       $          49,757
         Work in progress                                                                               8,397                   9,330
         Finished goods                                                                                 2,799                   3,110
                                                                                                       55,981                  62,197

         Less: reserve for obsolescence                                                                      —                      —

                                                                                            $            55,981     $           62,197


NOTE 8 - COMMITMENTS

We lease office space in Sterling, Virginia under a two-year operating lease that expired on March 31, 2011. We are currently leasing our space
on a month-to-month basis but plan to renew the lease for another year. The office lease agreement has certain escalation clauses and renewal
options. Additionally, we have lease agreements for computer equipment and an office copier/fax machine. We have no future minimum rental
payments required.

Rent expense was $76,397 and $78,076 for the years ended September 30, 2011 and 2010.

NOTE 9 - INCOME TAXES

We account for income taxes under the provisions of ASC 740-10-25. ASC 740-10-25 prescribes a recognition threshold and a measurement
attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from
tax positions should be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon
examination by the appropriate taxing authority that would have full knowledge of all the relevant information. A tax position that meets the
more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than fifty percent likely of being realized
upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than not recognition threshold should be recognized in
the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the
more-likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is
no longer met. ASC 740-10-25 also provides guidance on the accounting for and disclosure of unrecognized tax benefits, interest, and
penalties. ASC 740-10-25 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the
financial statements and the tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax losses and tax credit
carryforwards. ASC 740-10-25 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of
deferred tax assets. At September 30, 2011 and 2009 the Company has no unrecognized tax benefits, interest, or penalties.


                                                                       F- 31
                                                     IceWEB, Inc. and Subsidiaries
                                         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                Years ended September 30, 2011 and 2010



NOTE 9 - INCOME TAXES (continued)

A summary of our deferred tax is as follows:

                                                                                                              2011                   2010
         Deferred Tax Assets:
         Tax benefit of net operating loss carry forward                                                 $      4,324,000     $      5,360,000
         Unpaid accrued salaries                                                                                   24,000               17,000
         Allowance for doubtful accounts                                                                          113,000              113,000
         Reserve for legal settlement                                                                                   -              353,000
         Amortization of leasehold improvements                                                                   271,000              182,000
         Amortization of intangibles                                                                                    -              302,000
                                                                                                                4,732,000            6,327,000

         Less: valuation allowance                                                                            (4,732,000 )          (6,327,000 )

         Net deferred tax assets                                                                         $              —     $             —


As of September 30, 2011 we had unused net operating loss carry forwards of approximately $11,500,000 available to reduce our future federal
taxable income. Net operating loss carryforwards expire through fiscal years ending 2031. Internal Revenue Code Section 382 places a
limitation on the amount of taxable income that can be offset by carryforwards after a change in control (generally a greater than 50% change
in ownership).

The valuation allowance at September 30, 2011 was $4,732,000. The decrease during fiscal 2011 was approximately $1,595,000.

Net operating loss carryforwards and the associated deferred tax asset were reduced during fiscal September 30, 2011 to reflect reversals of
certain temporary differences and management’s re-assessment of its net operating loss carryforwards for tax purposes.

The table below summarizes the differences between our effective tax rate and the statutory federal rate as follows for fiscal 2011 and 2010.
The effective tax rate is 34% Federal and 3.6% State after Federal tax benefit:

                                                                                                         2011                2010
                                                                                                                   )                    )
         Computed “expected” tax benefit                                                                     (34.0 %              (34.0 %
                                                                                                                   )                    )
         State income taxes                                                                                   (3.6 %               (3.6 %
         Other permanent differences                                                                          10.8 %                1.0 %
         Change in valuation allowance                                                                        26.8 %               36.6 %

         Effective tax rate                                                                                     0.0 %               0.0 %

NOTE 10 - CONCENTRATION OF CREDIT RISK

Bank Balances

The Company is subject to concentrations of credit risk primarily from cash. At September 30, 2011, the FDIC insured deposits up to
$250,000. At September 30, 2011, the Company’s bank balances did not exceed the FDIC insurance limit. While the Company periodically
evaluates the credit quality of the financial institutions in which it holds deposits, it cannot reasonably alleviate the risk associated with the
sudden possible failure of such financial institutions.

Major Customers

Sales to 5 customers represented approximately 90% of total sales for the year ended September 30, 2011. As of September 30, 2011
approximately 84% of our accounts receivable was due from one customer. Sales to eight customers represented approximately 89% in 2010.
F- 32
                                                      IceWEB, Inc. and Subsidiaries
                                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                 Years ended September 30, 2011 and 2010



NOTE 11 - STOCKHOLDERS’ EQUITY (DEFICIT)

Preferred Stock

Our authorized capital includes 10,000,000 shares of blank check preferred stock, par value $0.001 per share, of which 1,666,667 shares have
previously been designated as Series A Convertible Preferred Stock. Our Board of directors, without further stockholder approval, may issue
our preferred stock in one or more series from time to time and fix or alter the designations, relative rights, priorities, preferences,
qualifications, limitations and restrictions of the shares of each series. In September 2005, Our Board of directors authorized a series of 833,334
shares of blank check preferred stock be designated as Series B Convertible Preferred Stock and on September 28, 2005, we filed a Certificate
of Designations of Preferences, Rights and Limitations of Series B Preferred with the Secretary of State of Delaware. On December 29, 2005,
we filed an Amended and Restated Certificate of Designations of Preferences, Rights and Limitations of Series B Convertible Preferred Stock
increasing the number of shares authorized under this series to 1,833,334 shares.

A) Series A Convertible Preferred Stock

All shares of Series A Convertible Preferred Stock were converted into shares of our common stock in fiscal 2008. As of September 30, 2011
there are no Series A Convertible Preferred shares outstanding. The warrants issued in conjunction with the Series A Convertible Preferred
Stock transaction were fully converted into shares of our common stock in fiscal 2008. There are no outstanding warrants related to the Series
A Convertible Preferred Stock transaction at September 30, 2011.

On March 30, 2005, we entered into a Preferred Stock Purchase Agreement and related agreements with Barron Partners LP. Under the terms
of this agreement, we sold Barron Partners LP, an accredited investor, 1,666,667 shares of our Series A Convertible Preferred Stock and issued
the purchaser the Common Stock Purchase Warrants “A”, “B” and “C” to purchase an aggregate of 4,500,000 shares of our common stock at
exercise prices ranging from $2.00 to $9.60 per share for an aggregate purchase price of $1,000,000. We received net proceeds of $900,000
after payment of expenses of $35,000 and a finder’s fee to Liberty Company LLC of $65,000. We also issued Liberty Company LLC, a
broker-dealer, a Common Stock Purchase Warrant “A” exercisable into 175,000 shares of our common stock with an exercise price of $0.70
per share as additional compensation for its services. We used these proceeds for general working capital and acquisitions. The transaction was
exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

B) Series B Convertible Preferred Stock

The designations, rights and preferences of the Series B Convertible Preferred Stock provide:

•    no dividends are payable on the Series B Convertible Preferred Stock. So long as these shares are outstanding, we cannot pay dividends
     on our common stock nor can it redeem any shares of its common stock, the shares of Series B Convertible Preferred Stock do not have
     any voting rights, except as may be provided under Delaware law,

•    so long as the shares are outstanding, we cannot change the designations of the Series B Convertible Preferred Stock, create a class of
     securities that in the instance of payment of dividends or distribution of assets upon our liquidation ranks senior to or pari passu with the
     Series B Convertible Preferred Stock or increase the number of authorized shares of Series B Convertible Preferred Stock, the shares carry
     a liquidation preference of $0.2727 per share,

•    each share of Series B Convertible Preferred Stock is convertible at the option of the holder into one share of our common stock based
     upon an initial conversion value of $0.2727 per share. The conversation ratio is subject to adjustment in the event of stock dividends,
     stock splits or reclassification of our common stock. The conversion ratio is also subject to adjustment in the event we should sell any
     shares of its common stock or securities convertible into common stock at an effective price less than the conversion ratio then in effect,
     in which case the conversion ratio would be reduced to the lesser price. No conversion of the Series B Convertible Preferred Stock may
     occur if a conversion would result in the holder, and any of its affiliates beneficially owning more than 4.9% of our outstanding common
     shares following such conversion. This provision may be waived or amended only with the consent of the holders of all of the Series B
     Convertible Preferred Stock and the consent of the holders of a majority of our outstanding shares of common stock who are not affiliates,


                                                                      F- 33
                                                    IceWEB, Inc. and Subsidiaries
                                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               Years ended September 30, 2011 and 2010



NOTE 11 - STOCKHOLDERS’ EQUITY (DEFICIT) (continued)

•    so long as the Series B Convertible Preferred Stock is outstanding, we have agreed not to issue any rights, options or warrants to holders
     of its common stock entitling the holders to purchase shares of its common stock at less than the conversion ratio without the consent of
     the holders of a majority of the outstanding shares of Series B Convertible Preferred Stock. If we should elect to undertake such an
     issuance and the Series B holders consent, the conversion ratio would be reduced. Further, if we should make a distribution of any
     evidence of indebtedness or assets or rights or warrants to subscribe for any security to our common stockholders, the conversion value
     would be readjusted,

•    the shares of Series B Convertible Preferred Stock automatically convert into shares of our common stock in the event of change of
     control of the Company, and

•    so long as the shares of Series B Convertible Preferred Stock are outstanding, we cannot sell or issue any common stock, rights to
     subscribe for shares of common stock or securities which are convertible or exercisable into shares of common stock at an effective
     purchase price of less than the then conversion value of the Series B Convertible Preferred Stock.

Common Stock

Fiscal 2011 Transactions

         On September 30, 2011 we sold approximately 9,762,671 restricted stock units at $0.12/unit. Each unit consists of one share of
common stock and a warrant exercisable for one share of common stock. The warrants have a five year life, an exercise price of $0.15/share,
and are callable if the Company’s common stock trades over $0.25/share for ten consecutive trading days.

         Anderson and Strudwick, Inc. acted as the placement agent in connection with the sale of the securities and as compensation received
a cash fee of approximately $114,127, and warrants to purchase approximately 976,267 shares of the Company’s common stock at a price per
share of $0.15.

         The sale of the Shares and the Warrants was made pursuant to Section 4(2) of the Securities Act for transactions not involving a public
offering and/or Regulation D, as promulgated by the SEC under the Securities Act of 1933, and in reliance upon exemptions from registration
under applicable state securities laws.

        During February, 2011 we sold 2,000,000 shares of common stock, valued at $200,000 to an accredited investor, and the issuance was
exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

        During March, 2011 we sold 250,000 shares of common stock, valued at $25,000 to an accredited investor, and the issuance was
exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

        During May, 2011 we sold 1,609,600 shares of common stock, valued at $184,464 to two accredited investors, and the issuance was
exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

         During July, 2011 we sold 416,667 shares of common stock, valued at $91,541 to an accredited investor, and the issuance was exempt
from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.


                                                                     F- 34
                                                    IceWEB, Inc. and Subsidiaries
                                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               Years ended September 30, 2011 and 2010



NOTE 11 - STOCKHOLDERS’ EQUITY (DEFICIT) (continued)

Fiscal 2010 Transactions

During fiscal 2010, we issued 18,715,000 of our common stock in connection with the exercise of options under our stock option plan.

During November, 2009, we sold 1,000,000 shares of common stock, valued at $130,000 to a Director for $40,000, and recognized stock based
compensation expense of $90,000. The purchaser was an accredited investor and the issuance was exempt from registration under the
Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

During November, 2009, we sold 1,500,000 shares of common stock at a per share price of $0.10, valued at $150,000 to an accredited investor,
and the issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that
act.

During March, 2010, we sold 3,000,000 shares of common stock at a per share price of $0.10, valued at $300,000 to four accredited investors.
The issuances were exempt from registration under the Securities Act of 1933 in reliance on exemptions provided by Section 4(2) of that act.

During March, 2010, we issued 1,000,000 shares of common stock at a per share price of $0.17, valued at $170,000 to an accredited investor
for services rendered. The issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by
Section 4(2) of that act.

During February, 2010 we issued 8,800,000 shares of restricted common stock at a per share price of $0.086, valued at $756,800, in lieu of pay
to five of our employees, including two executive officers. The recipients were accredited investors and the issuances were exempt from
registration under the Securities Act of 1933 in reliance on exemptions provided by Section 4(2) of that act.

During April and May, 2010 we sold 10,080,000 units of our securities to 35 accredited investors in a private placement exempt from
registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act and Regulation D, with each unit
consisting of one share of our common stock and one 12 month common stock purchase warrants. We received gross proceeds of $2,316,000 in
this offering. Jesup & Lamont Securities Incorporated, a broker-dealer and member of FINRA, acted as finder for us in the offering and we
paid Jesup & Lamont Securities Incorporated a fee of $162,120 and issued them one-year common stock purchase warrants to purchase an
aggregate of 877,100 shares of our common stock at an exercise price of $0.40 per share. In addition, we paid Jesup & Lamont Securities
Incorporated legal expenses totaling $25,000 incurred in the preparation of the various transactional documents. We are using the net proceeds
of this offering for general working capital.

In July 2010, we issued 2,678,571 shares of common stock valued at $401,786 to Optimus Capital Partners, LLC as consideration in the
settlement of certain litigation. The recipient was an accredited investor and the issuance was exempt from registration under the Section Act of
1933 in reliance on an exemption provided by Section 4(2) of that act.

In September 2010, we issued 3,000,000 shares of our common stock in full satisfaction of $1,090,136 of principal and interest due under a
convertible debenture. The recipient was an accredited investor and the issuance was exempt from registration under the Section Act of 1933 in
reliance on an exemption provided by Section 4(2) of that act.

During fiscal 2010, in conjunction with certain employment agreements, we issued 494,937 shares of restricted common stock valued at
$97,065, in lieu of pay to non-executive employees. The recipients were accredited investors and the issuances were exempt from registration
under the Securities Act of 1933 in reliance on exemptions provided by Section 4(2) of that act.

During May, 2010, we issued 200,000 shares of common stock at a per share price of $0.30, valued at $60,000 to an accredited investor for
services rendered. The issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section
4(2) of that act.

During fiscal 2010, in conjunction with a consulting agreement, we issued 250,000 shares of restricted common stock valued at $56,234, in lieu
of pay to non-executive employees. The recipients were accredited investors and the issuances were exempt from registration under the
Securities Act of 1933 in reliance on exemptions provided by Section 4(2) of that act.


                                                                     F- 35
                                                    IceWEB, Inc. and Subsidiaries
                                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               Years ended September 30, 2011 and 2010



NOTE 11 - STOCKHOLDERS’ EQUITY (DEFICIT) (continued)

In June 2010, we issued 1,300,000 shares of common stock valued at $210,000 as partial consideration in the settlement of certain litigation.
The recipients were an accredited investor and the issuance was exempt from registration under the Section Act of 1933 in reliance on an
exemption provided by Section 4(2) of that act.

Common Stock Warrants

A summary of the status of our outstanding common stock warrants as of September 30, 2011 and 2010 and changes during the period ending
on that date is as follows:

                                                               Year Ended September 30,                      Year Ended September 30,
                                                                        2011                                          2010
                                                                                 Weighted                                     Weighted
                                                                                 Average                                       Average
                                                              Number of          Exercise                   Number of          Exercise
                                                              Warrants             Price                    Warrants            Price
Common Stock Warrants
Balance at beginning of year                                        8,287,100       $           0.40              225,000         $          1.78
Granted                                                            11,238,938                   0.16            8,137,100                    0.40
Exercised                                                                  —                      —                    —                       —
Forfeited                                                          (7,997,100 )                 0.40              (75,000 )                  6.00
Balance at end of year                                             11,528,938       $           0.17            8,287,100         $          0.40


Warrants exercisable at end of year                                11,528,938       $           0.17            8,287,100
Weighted average fair value of warrants granted or
re-priced during the year                                                           $            —


The following table summarizes information about common stock warrants outstanding at September 30, 2011:

                                          Warrants Outstanding                                               Warrants Exercisable
                                                 Weighted
                             Number              Average                      Weighted                    Number                  Weighted
     Range of             Outstanding at        Remaining                     Average                  Exercisable at             Average
     Exercise             September 30,        Contractual                    Exercise                 September 30,              Exercise
      Price                   2011                  Life                       Price                       2011                    Price
$               0.15             10,738,938          5.00 Years          $               0.15                 10,738,938      $              0.15
$               0.40                500,000          0.53 Years          $               0.40                    500,000      $              0.40
$               0.50                290,000          2.03 Years          $               0.50                    290,000      $              0.50
                                 11,528,938                              $               0.17                 11,528,938      $              0.17


NOTE 12 - STOCK OPTION PLAN

In August 2000, the Board of directors adopted the 2000 Management and Director Equity Incentive and Compensation Plan (the “Plan”) for
directors, officers and employees that provides for non-qualified and incentive stock options to be issued enabling holders thereof to purchase
common shares of our stock at exercise prices determined by our Board of directors. The Plan was approved by our stockholders in August
2001.


                                                                     F- 36
                                                      IceWEB, Inc. and Subsidiaries
                                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                 Years ended September 30, 2011 and 2010




NOTE 12 - STOCK OPTION PLAN (continued)

The purpose of the Plan is to advance our interests and those of its stockholders by providing a means of attracting and retaining key
employees, directors and consultants. In order to serve this purpose, we believe the Plan encourages and enables key employees, directors and
consultants to participate in its future prosperity and growth by providing them with incentives and compensation based on its performance,
development and financial success. Participants in the Plan may include our officers, directors, other key employees and consultants who have
responsibilities affecting our management, development or financial success.

Awards may be made under the Plan in the form of Plan options, shares of our common stock subject to a vesting schedule based upon certain
performance objectives (“Performance Shares”) and shares subject to a vesting schedule based on the recipient’s continued employment
(“restricted shares”). Plan options may either be options qualifying as incentive stock options under Section 422 of the Internal Revenue Code
of 1986, as amended or options that do not so qualify. Any incentive stock option granted under the Plan must provide for an exercise price of
not less than 100% of the fair market value of the underlying shares on the date of such grant, but the exercise price of any incentive option
granted to an eligible employee owning more than 10% of our common stock must be at least 110% of such fair market value as determined on
the date of the grant. Only persons who are officers or other key employees are eligible to receive incentive stock options and performance
share grants. Any non-qualified stock option granted under the Plan must provide for an exercise price of not less than 50% of the fair market
value of the underlying shares on the date of such grant.

As amended in fiscal 2011, the Plan permits the grant of options and shares for up to 60,000,000 shares of our common stock. The Plan
terminates 10 years from the date of the Plan’s adoption by our stockholders.

The term of each Plan option and the manner in which it may be exercised is determined by the Board of directors, provided that no Plan option
may be exercisable more than three years after the date of its grant and, in the case of an incentive option granted to an eligible employee
owning more than 10% of our common stock, no more than five years after the date of the grant. The exercise price of the stock options may be
paid in either cash, or delivery of unrestricted shares of common stock having a fair market value on the date of delivery equal to the exercise
price, or surrender of shares of common stock subject to the stock option which has a fair market value equal to the total exercise price at the
time of exercise, or a combination of the foregoing methods.

The fair value of stock options granted was estimated at the date of grant using the Black-Scholes options pricing model. We used the
following assumptions for determining the fair value of options granted under the Black-Scholes option pricing model:

                                                                                       Year Ended September 30,
                                                                                        2011              2010
         Expected volatility                                                            129% - 325 %       129% - 325 %
         Expected term                                                                   1 - 5 Years        1 - 5 Years
         Risk-free interest rate                                                       0.03% - 0.48 %    0.03% - 0.48 %
         Forfeiture Rate                                                                     0% - 45 %          0% - 45 %
         Expected dividend yield                                                                   0%                 0%

The expected volatility was determined with reference to the historical volatility of our stock. We use historical data to estimate option
exercise, employee termination, and forfeiture rate within the valuation model. The expected term of options granted represents the period of
time that options granted are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option is based
on the U.S. Treasury rate in effect at the time of grant.


                                                                       F- 37
                                                    IceWEB, Inc. and Subsidiaries
                                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               Years ended September 30, 2011 and 2010


NOTE 12 - STOCK OPTION PLAN (continued)

For the year ended September 30, 2011, total stock-based compensation charged to operations for option-based arrangements amounted to
$131,680. At September 30, 2011, there was approximately $42,608 of total unrecognized compensation expense related to non-vested
option-based compensation arrangements under the Plan.

A summary of the status of our outstanding stock options as of September 30, 2011 and changes during the period ending on that date is as
follows:

                                           Year Ended September 30,                                   Year Ended September 30,
                                                    2011                                                       2010
                                                    Weighted                                                   Weighted
                                                    Average        Aggregate                                    Average        Aggregate
                                                    Exercise        Intrinsic                                   Exercise        Intrinsic
                                                      Price          Value                                       Price           Value
Stock options
Balance at beginning of year         11,604,404     $          0.27                               10,944,483      $        0.27   $
Granted                                       -                   -                               32,410,000      $        0.09                -
Exercised                            (6,791,361 )   $          0.19                              (30,570,600 )    $        0.09                -
Forfeited                              (708,556 )   $          0.50                               (1,179,479 )    $        0.16
Balance at end of year                4,104,487     $          0.37   $       184,493             11,604,404      $        0.27   $    1,351,502

Options exercisable at end of
year                                   3,647,720    $          0.40   $       155,252              9,691,237      $        0.30   $    1,037,335


Weighted average fair value of
options granted during the year                     $             -                                               $       0.078



The following table summarizes information about employee stock options outstanding at September 30, 2011:

                                             Options Outstanding                                                 Options Exercisable
                                                     Weighted
                              Number                 Average                   Weighted                   Number                 Weighted
     Range of              Outstanding at           Remaining                  Average                 Exercisable at            Average
     Exercise              September 30,           Contractual                 Exercise                September 30,             Exercise
      Price                    2011                    Life                     Price                      2011                   Price
$       0.001-0.25                 1,739,367          2.59 Years          $               0.06                 1,358,000       $          0.06
         0.30-0.48                   100,400          4.83 Years                          0.28                    25,000                  0.37
         0.54-0.60                 1,764,720           1.1 Years                          0.59                 1,764,720                  0.59
         0.61-0.80                   500,000          0.65 Years                          0.70                   500,000                  0.70
                                   4,104,487                              $               0.37                 3,647,720       $          0.40


NOTE 13 - INVESTMENTS

(a) Summary of Investments

Marketable Equity Securities :

In November, 2009 we acquired 800,000 shares of VOIS Inc. common stock for $48,000. The Company was able to negotiate a purchase price
less than the then trading price of VOIS’ common stock based upon the illiquid nature of the investment and the lack of any other willing
purchasers for VOIS securities. Due to the illiquid nature of the VOIS Inc. common stock we applied a discount factor of 20% to the fair value
of the marketable security.
As of September 30, 2011, the Company’s investments in marketable equity securities are based on the September 30, 2011 stock price as
reflected on the OTCBB stock exchange , reduced by a discount factor if those shares have selling restrictions. These marketable equity
securities are summarized as follows:


                                                                 F- 38
                                                      IceWEB, Inc. and Subsidiaries
                                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                 Years ended September 30, 2011 and 2010



NOTE 13 - INVESTMENTS (continued)

                                                                                              Gross              Gross
                                                                                            Unrealized         Unrealized            Fair
         SEPTEMBER 30, 2011                                                  Cost             Gains             Losses               Value

         Publicly traded equity securities                               $    48,000    $        67,200    $                —    $    115,200

         Total                                                           $    48,000    $        67,200    $                —    $    115,200


The unrealized gains are presented in comprehensive income in the consolidated statement of operations and comprehensive income.

(b) Gains and Losses on Investments

The following table summarizes the realized net gains (losses) associated with the Company’s investments:

                                                                                                                    Fiscal Year Ended
                                                                                                                       September30
                                                                                                                    2011          2010

         Net gains/(loss) on investments in publicly traded equity securities                                   $       67,200   $    476,800

         Net gains on investments                                                                               $       67,200   $    476,800


On January 1, 2008, the Company adopted ASC 820, which, among other things, defines fair value, establishes a consistent framework for
measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or
nonrecurring basis. The Company did not adopt the ASC 820 fair value framework for nonfinancial assets and liabilities, except for items that
are recognized or disclosed at fair value in the financial statements at least annually. ASC 820 clarifies that fair value is an exit price,
representing the amount that would either be received to sell an asset or be paid to transfer a liability in an orderly transaction between market
participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would
use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier fair value hierarchy, which
prioritizes the inputs used in measuring fair value as follows:

Level 1. Observable inputs such as quoted prices in active markets for identical assets or liabilities;

Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.


Investment Measured at Fair Value on a Recurring Basis:

                                                                                     Fair Value Measurements Using:
                                                                                                 Significant
                                                                         Quoted Prices             Other             Significant
                                                                           in Active             Observable         Unobservable
                                                                           Markets                 Inputs              Inputs
                                                                           (Level 1)              (Level 2)           (Level 3)

         Marketable Equity Securities, net of discount for effect
         of restriction                                              $                 —           $                —        $        115,200


                                                                         F- 39
                                                     IceWEB, Inc. and Subsidiaries
                                         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                Years ended September 30, 2011 and 2010



NOTE 13 - INVESTMENTS (continued)

We categorize the securities as investments in marketable securities available for sale. These securities are quoted either on an exchange or
inter-dealer quotation (pink sheet) system. The securities are restricted and cannot be readily resold by us absent a registration of those
securities under the Securities Act of 1933 (the “Securities Act”) or the availabilities of an exemption from the registration requirements under
the Securities Act. As these securities are often restricted, we are unable to liquidate them until the restriction is removed. Unrealized gains or
losses on marketable securities available for sale are recognized as an element of comprehensive income based on changes in the fair value of
the security. Once liquidated, realized gains or losses on the sale of marketable securities available for sale are reflected in our net income for
the period in which the security was liquidated.

Under the guidance of ASC 320, “Investments”, we periodically evaluate other-than-temporary impairment (OTTI) of securities to determine
whether a decline in their value is other than temporary. Management utilizes criteria such as the magnitude and duration of the decline, in
addition to the reasons underlying the decline, to determine whether the loss in value is other than temporary. The term “other-than-temporary”
is not intended to indicate that the decline is permanent. It indicates that the prospects for a near term recovery of value are not necessarily
favorable, or that there is a lack of evidence to support fair values equal to, or greater than, the carrying value of the investment. Once a decline
in value is determined to be other than temporary, the value of the security is reduced and a corresponding impairment charge to earnings is
recognized. In the assessment of OTTI for various securities at September 30, 2011 the guidance in ASC 320, “the Investment-Debt and Equity
Securities,” is carefully followed.

There were no impairment charges on investments in publicly traded equity securities for the year ended September 30, 2011 or for the year
ended September 30, 2010.

The Company has evaluated its publicly traded equity securities as of September 30, 2011, and has determined that there were no unrealized
losses that indicate an other-than-temporary impairment. This determination was based on several factors, which include the length of time and
extent to which fair value has been less than the cost basis and the financial condition and near-term prospects of the issuer, and the Company’s
intent and ability to hold the publicly traded equity securities for a period of time sufficient to allow for any anticipated recovery in market
value.

NOTE 14 - COMPREHENSIVE INCOME (LOSS)

Comprehensive income is comprised of net income and other comprehensive income or loss. Other comprehensive income or loss refers to
revenue, expenses, gains and losses that under accounting principles generally accepted in the United States are included in comprehensive
income but excluded from net income as these amounts are recorded directly as an adjustment to stockholders’ equity.

Our other comprehensive income consists of unrealized gains on marketable securities available for sale of $67,200.

NOTE 15 - SEGMENT REPORTING

Although the Company has a number of operating divisions, separate segment data has not been presented as they meet the criteria for
aggregation as permitted by ASC Topic 280, “Segment Reporting” (formerly Statement of Financial Accounting Standards (SFAS) No. 131,
“Disclosures About Segments of an Enterprise and Related Information”).

Our chief operating decision-maker is considered to be our Chief Executive Officer (CEO). The CEO reviews financial information presented
on a consolidated basis for purposes of making operating decisions and assessing financial performance. The financial information reviewed by
the CEO is identical to the information presented in the accompanying consolidated statements of operations. Therefore, the Company has
determined that it operates in a single operating segment, specifically, web communications services. For the periods ended September 30,
2011 and 2010 all material assets and revenues of the Company were in the United States.


                                                                       F- 40
                                                     IceWEB, Inc. and Subsidiaries
                                         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                Years ended September 30, 2011 and 2010




NOTE 16 - COMMITMENTS AND CONTINGENCIES

We are a party to litigation which arises primarily in the ordinary course of business. In the opinion of management, the ultimate disposition of
such litigation should not have a material adverse effect on our financial position or results of operations.

NOTE 17 - SUBSEQUENT EVENTS

       On November 23, 2011, IceWEB, Inc. (the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with
three accredited investors pursuant to which the Company sold $2,012,500 in principal amount of Senior Convertible Notes (the “Notes”) and
issued the investors Series O, Series P and Series Q Warrants (collectively, the “Warrants”) to purchase up to an aggregate of 35,514,708
shares of the Company’s common stock for an aggregate purchase price of $1,750,000 in a private transaction exempt from registration under
the Securities Act of 1933, as amended (the “Securities Act”) in reliance on an exemption from registration pursuant to Section 4(2) and
Regulation D of the Securities Act. The Company issued the Notes at an original issue discount of 13%. We also entered into a Registration
Rights Agreement with investors in which we agreed to register the shares underlying the Notes and the Warrants.

       We paid Rodman & Renshaw, LLC, a broker-dealer and member of FINRA who acted as the exclusive placement agent for us in the
offering, a cash commission of $155,000, issued it warrants to purchase an aggregate of 911,765 shares of our common stock with an exercise
price of $0.17 per share which are identical to the Series O Warrants, and reimbursed it for legal expenses of $20,000. We reimbursed Iroquois
Master Fund Ltd., an investor in the offering, $60,000 for its non-accountable expenses related to the investment. We are using the net
proceeds from this offering for general working capital.

       The Purchase Agreement contains customary covenants on our part that are typical for transactions of this type, as well as the following
additional covenants:

                 we agreed not to file any registration statement, other than the registration statement we are required to file under the
                  Registration Rights Agreement described below or a registration statement on Form S-4 or S-8, until the first date on which
                  the resale by the investors of all shares of common stock underlying the securities sold in the offering is either covered by
                  one or more effective registration statements or may be resold pursuant to Rule 144 under the Securities Act without the
                  need for current public information required by Rule 144 (the “Applicable Date”);
                 we agreed not conduct any other securities offerings until 30th trading day after the Applicable Date, except for certain
                  excluded securities, and while the Notes and Warrants are outstanding, we agreed not to enter into any variable rate
                  transactions;
                 we agreed to offer to the investors, until the first anniversary of the closing date, the opportunity to participate in any
                  subsequent securities offerings by our company;
                 so long as the Notes or Warrants are outstanding, we agreed not to issue any securities other than for cash or in connection
                  with options which may be granted to our officers, directors and employees; and
                 we are required to enter into an amendment with Sand Hill Finance, LLC for our factoring agreement to extend the maturity
                  date of the agreement to at least 91 days after all obligations under the Notes have been satisfied, among other modifications.

The Company has evaluated subsequent events through the filing date of this Form 10-K, and determined that no subsequent events have
occurred that would require recognition in the financial statements or disclosure in the notes thereto other than as discussed in the
accompanying notes.


                                                                     F- 41
                                                        TABLE OF CONTENTS

                                                                                        Page
About this Prospectus                                                                   2
Prospectus Summary                                                                      2
Summary of the Offering                                                                 3
Terms of the Offering with the Selling Security holders                                 4
Special Note Regarding Forward-Looking Statements                                       2
Selected Consolidated Financial Data                                                    3
Risk Factors                                                                            5
Market for Common Equity and Related Stockholder Matters                                15
Plan of Distribution                                                                    15
Management’s Discussion and Analysis of Financial Condition and Results of Operations   17
Our Business                                                                            30
Management                                                                              36
Executive Compensation                                                                  41
Certain Relationships and Related Transactions                                          46
Principal Stockholders                                                                  46
Use of Proceeds                                                                         48
Selling Stockholders                                                                    48
Description of Securities                                                               50
Legal Matters                                                                           55
Experts                                                                                 55
Where You Can Find Additional Information                                               55
Index to Financial Statements                                                           F-1

                                                             IceWEB, Inc.

                                                            PROSPECTUS

                                                  39,258,270 Shares of Common Stock

                                                               [ ], 2012


                                                                 F- 2
                                                           PART II
                                           INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The estimated expenses payable by us in connection with the distribution of the securities being registered are as follows:

                                            SEC Registration and Filing Fee*         $          553
                                            Legal Fees and Expenses*                         25,000
                                            Accounting Fees and Expenses*                     7,500
                                            Financial Printing*                                 400
                                            Transfer Agent Fees*                              1,620
                                            Miscellaneous*                                      235
                                            TOTAL                                    $       35,308


*        Estimated

ITEM 14.     INDEMNIFICATION OF DIRECTORS AND OFFICERS.

     Our Certificate of Incorporation and By-laws provide for the indemnification of our directors and officers to the fullest extent permitted
by the Delaware General Corporation Law (“DGCL”).

     Section 145 of the DGCL permits a corporation, under specified circumstances, to indemnify its directors, officers, employees or agents
against expenses (including attorney’s fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by them in
connection with any action, suit or proceeding brought by third parties by reason of the fact that they were or are directors, officers, employees
or agents of the corporation, if such directors, officers, employees or agents acted in good faith and in a manner they reasonably believed to be
in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reason to believe their
conduct was unlawful. In a derivative action, i.e., one by or in the right of the corporation, indemnification may be made only for expenses
actually and reasonably incurred by directors, officers, employees or agents in connection with the defense or settlement of any action or suit,
and only with respect to a matter as to which they shall have acted in good faith and in a manner they reasonably believed to be in or not
opposed to the best interests of the corporation, except that no indemnification shall be made if such person shall have been adjudged liable to
the corporation, unless and only to the extent that the court in which the action or suit was brought shall determine upon application that the
defendant directors, officers, employees or agents are fairly and reasonably entitled to indemnity for such expenses despite such adjudication of
liability.

   Our Certificate of Incorporation contains a provision which eliminates, to the fullest extent permitted by the DGCL, director liability for
monetary damages for breaches of the fiduciary duty of care or any other duty as a director.

    Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons
controlling our company pursuant to the foregoing provisions, we have been informed that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the act and is therefore unenforceable.

ITEM 15.     RECENT SALES OF UNREGISTERED SECURITIES.

     Following are all issuances of securities by the registrant during the past three years which were not registered under the Securities Act of
1933, as amended. In each of these issuances the recipient represented that he was acquiring the shares for investment purposes only, and not
with a view towards distribution or resale except in compliance with applicable securities laws. No general solicitation or advertising was used
in connection with any transaction, and the certificate evidencing the securities that were issued contained a legend restricting their
transferability absent registration under the Securities Act of 1933 or the availability of an applicable exemption therefrom. Unless specifically
set forth below, no underwriter participated in the transaction and no commissions were paid in connection with the transactions        and the
issuances were exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.


                                                                      II- 1
Fiscal 2012 Transactions

In May, 2012 we executed a Finders’ Agreement pursuant to which the Finder acted as the exclusive Finder with respect to sales by us in a
private placement transaction of up to $2.5 million in aggregate principal amount of Equity or Equity-related securities. We sold 13,455,958
units in exchange for gross proceeds of $1,614,715. These sales were made in a private transaction exempt from registration under the
Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of the Act and Regulation D thereunder.

          On November 23, 2011, we entered into a Securities Purchase Agreement with three accredited investors pursuant to which we sold
$2,012,500 in principal amount of senior convertible notes and issued the investors Series O, Series P and Series Q warrants to purchase up to
an aggregate of 35,514,789 shares of our common stock for an aggregate purchase price of $1,750,000 in a private transaction exempt from
registration under the Securities Act. We issued the senior convertible notes at an original issue discount of 13%. We also entered into a
Registration Rights Agreement with investors in which we agreed to register the shares underlying the senior convertible notes and the
warrants. We paid Rodman & Renshaw, LLC, a broker-dealer and member of FINRA who acted as the exclusive placement agent for us in the
offering, a cash commission of $155,000, issued it warrants to purchase an aggregate of 911,765 shares of our common stock with an exercise
price of $0.17 per share which are identical to the Series O warrants, and reimbursed it for legal expenses of $20,000. We reimbursed Iroquois
Master Fund Ltd., an investor in the offering, $60,000 for its non-accountable expenses related to the investment. We are using the net proceeds
from this offering for general working capital.

Fiscal 2011 Transactions

         On September 30, 2011 we sold approximately 9,762,671 restricted stock units at $0.12/unit. Each unit consists of one share of
common stock and a warrant exercisable for one share of common stock. The warrants have a five year life, an exercise price of $0.15/share,
and are callable if our company’s common stock trades over $0.25/share for ten consecutive trading days.

         Anderson and Strudwick, Inc. acted as the placement agent in connection with the sale of the securities and as compensation received
a cash fee of approximately $114,127, and warrants to purchase approximately 976,267 shares of our company’s common stock at a price per
share of $0.15.

         The sale of the Shares and the Warrants was made pursuant to Section 4(2) of the Securities Act for transactions not involving a public
offering and/or Regulation D, as promulgated by the SEC under the Securities Act, and in reliance upon exemptions from registration under
applicable state securities laws.

        During February, 2011 we sold 2,000,000 shares of common stock, valued at $200,000 to an accredited investor, and the issuance was
exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

        During March, 2011 we sold 250,000 shares of common stock, valued at $25,000 to an accredited investor, and the issuance was
exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

        During May, 2011 we sold 1,609,600 shares of common stock, valued at $184,464 to two accredited investors, and the issuance was
exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

         During July, 2011 we sold 416,667 shares of common stock, valued at $91,541 to an accredited investor, and the issuance was exempt
from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.


                                                                     II- 2
Fiscal 2010 Transactions

         During fiscal 2010, we issued 18,715,000 of our common stock in connection with the exercise of options under our stock option plan.

         During November, 2009, we sold 1,000,000 shares of common stock, valued at $130,000 to a Director for $40,000, and recognized
stock based compensation expense of $90,000. The purchaser was an accredited investor and the issuance was exempt from registration under
the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

          During November, 2009, we sold 1,500,000 shares of common stock at a per share price of $0.10, valued at $150,000 to an accredited
investor, and the issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2)
of that act.

          During March, 2010, we sold 3,000,000 shares of common stock at a per share price of $0.10, valued at $300,000 to four accredited
investors. The issuances were exempt from registration under the Securities Act of 1933 in reliance on exemptions provided by Section 4(2) of
that act.

         During March, 2010, we issued 1,000,000 shares of common stock at a per share price of $0.17, valued at $170,000 to an accredited
investor for services rendered. The issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption
provided by Section 4(2) of that act.

          During February, 2010 we issued 8,800,000 shares of restricted common stock at a per share price of $0.086, valued at $756,800, in
lieu of pay to five of our employees, including two executive officers. The recipients were accredited investors and the issuances were exempt
from registration under the Securities Act of 1933 in reliance on exemptions provided by Section 4(2) of that act.

          During April and May, 2010 we sold 10,080,000 units of our securities to 35 accredited investors in a private placement exempt from
registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act and Regulation D, with each unit
consisting of one share of our common stock and one 12 month common stock purchase warrants. We received gross proceeds of $2,316,000 in
this offering. Jesup & Lamont Securities Incorporated, a broker-dealer and member of FINRA, acted as finder for us in the offering and we
paid Jesup & Lamont Securities Incorporated a fee of $162,120 and issued them one-year common stock purchase warrants to purchase an
aggregate of 877,100 shares of our common stock at an exercise price of $0.40 per share. In addition, we paid Jesup & Lamont Securities
Incorporated legal expenses totaling $25,000 incurred in the preparation of the various transactional documents. We are using the net proceeds
of this offering for general working capital.

          In July 2010, we issued 2,678,571 shares of common stock valued at $401,786 to Optimus Capital Partners, LLC as consideration in
the settlement of certain litigation. The recipient was an accredited investor and the issuance was exempt from registration under the Section
Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

         In September 2010, we issued 3,000,000 shares of our common stock in full satisfaction of $1,090,136 of principal and interest due
under a convertible debenture. The recipient was an accredited investor and the issuance was exempt from registration under the Section Act of
1933 in reliance on an exemption provided by Section 4(2) of that act.

          During fiscal 2010, in conjunction with certain employment agreements, we issued 494,937 shares of restricted common stock valued
at $97,065, in lieu of pay to non-executive employees. The recipients were accredited investors and the issuances were exempt from
registration under the Securities Act of 1933 in reliance on exemptions provided by Section 4(2) of that act.

         During May, 2010, we issued 200,000 shares of common stock at a per share price of $0.30, valued at $60,000 to an accredited
investor for services rendered. The issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption
provided by Section 4(2) of that act.


                                                                     II- 3
         During fiscal 2010, in conjunction with a consulting agreement, we issued 250,000 shares of restricted common stock valued at
$56,234, in lieu of pay to non-executive employees. The recipients were accredited investors and the issuances were exempt from registration
under the Securities Act of 1933 in reliance on exemptions provided by Section 4(2) of that act.

          In June 2010, we issued 1,300,000 shares of common stock valued at $210,000 as partial consideration in the settlement of certain
litigation. The recipients were an accredited investor and the issuance was exempt from registration under the Section Act of 1933 in reliance
on an exemption provided by Section 4(2) of that act.

Fiscal 2009 Transactions

         On October 28, 2008 we issued 3,431,680 shares of restricted common stock at a per share price of $0.07, valued at $240,218, in lieu
of pay to five of our employees, including two of our executive officers. The recipients were accredited investors and the issuances were
exempt from registration under the Securities Act of 1933 in reliance on exemptions provided by Section 4(2) of that act.

         On February 18, 2009 we issued 480,000 shares of restricted common stock at a per share price of $0.14, valued at $67,200, in lieu of
pay to an employee The recipient was an accredited investor and the issuance was exempt from registration under the Securities Act of 1933 in
reliance on an exemption provided by Section 4(2) of that act.

         On March 26, 2009 we issued 6,243,581 shares of restricted common stock at a per share price of $0.09, valued at $560,305, in lieu of
pay to four of our employees, including two of our executive officers. The recipients were accredited investors and the issuances were exempt
from registration under the Securities Act of 1933 in reliance on exemptions provided by Section 4(2) of that act.

         On August 19, 2009 we issued 3,000,000 shares of restricted common stock at a per share price of $0.10 valued at $300,000, in lieu of
pay to three of our employees, including two of our executive officers. The recipients were accredited investors and the issuances were exempt
from registration under the Securities Act of 1933 in reliance on exemptions provided by Section 4(2) of that act.

         On June 3, 2009 we sold 1,400,000 shares of common stock at a per share price of $0.03, valued at $42,000 to an accredited investor
and the issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that
act.

         On June 8, 2009 we sold 1,000,000 shares of common stock at a per share price of $0.04, valued at $40,000 to an accredited investor
and the issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that
act.

         On June 11, 2009 we sold 500,000 shares of common stock at a per share price of $0.03, valued at $15,000 to an accredited investor
and the issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that
act.

          On August 10, 2009 we sold 1,000,000 shares of common stock at a per share price of $0.04, valued at $40,000 to an accredited
investor and the issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2)
of that act.

         On March 10, 2009, we issued 25,000 shares of our common stock valued at $2,500 in satisfaction of debt in the amount of $2,500,
which related to services rendered to us. The recipient was an accredited investor and the issuance was exempt from registration under the
Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

         On March 11, 2009, we issued 100,000 shares of our common stock valued at $4,000 in satisfaction of debt in the amount of $4,000,
which related to services rendered to us. The recipient was an accredited investor and the issuance was exempt from registration under the
Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.


                                                                     II- 4
         On June 25, 2009, we issued 100,000 shares of our common stock valued at $6,000 in satisfaction of debt in the amount of $6,000,
which related to services rendered to us. The recipient was an accredited investor and the issuance was exempt from registration under the
Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

         On September 2, 2009, we issued 1,500,000 shares of our common stock valued at $120,000 in satisfaction of debt in the amount of
$120,000, which related to services rendered to us. The recipient was an accredited investor and the issuance was exempt from registration
under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

         In March, 2009, in conjunction with the sale of its subsidiary IceWEB Virginia, Inc., the Company issued 1,000,000 shares of our
common stock to the purchaser, valued at $80,000. The recipient was an accredited investor and the issuance was exempt from registration
under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

During March, 2009, we sold 2,000,000 shares of common stock at a per share price of $0.042, valued at $83,000 to an accredited investor who
is a related party to an executive officer. As of March 31, 2010 the Company had not yet received the proceeds from the investor and as a result
we recorded the subscription receivable as a contra equity account on its balance sheet. The recipient was an accredited investor and the
issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

     The following documents are filed as a part of this registration statement or are incorporated by reference to previous filings, if so
indicated:

2.1            Agreement and Plan of Reorganization and Stock Purchase Agreement with Disease S.I. Inc.(4)
2.2            Agreement and Plan of Merger with IceWEB Communications, Inc. (8)
2.3            Agreement and Plan of Merger with Seven Corporation (9)
3.1            Certificate of Incorporation (1)
3.2            Certificate of Amendment to Certificate of Incorporation (1)
3.3            Certificate of Amendment to Certificate of Incorporation (1)
3.4            Certificate of Amendment to Certificate of Incorporation (1)
3.5            Certificate of Amendment to Certificate of Incorporation (2)
3.6            Certificate of Amendment to Certificate of Incorporation (3)
3.7            Certificate of Amendment to Certificate of Incorporation (11)
3.8            Certificate of Designations of Series A Convertible Preferred Stock (12)
3.9            Certificate of Amendment to Certificate of Incorporation (13)
3.10           Bylaws (1)
3.11           Certificate of Designations of Series B Convertible Preferred Stock (17)
4.1            Form of Common Stock Purchase Warrant “A” (12)
4.2            Form of Common Stock Purchase Warrant “B” (12)
4.3            Form of Common Stock Purchase Warrant “C” (12)
4.4            Form of Series H Common Stock Purchase Warrant (16)
4.5            Form of Series I Common Stock Purchase Warrant (16)
4.6            Form of $0.70 Common Stock Purchase Warrant “A” (16)
4.7            Form of Comerica Bank warrant (16)
4.8            Form of Common Stock Purchase Warrant “D” (17)
4.9            Form of Common Stock Purchase Warrant “E” (17)
4.10           Form of Common Stock Purchase Warrant “F” (17)
4.11           Form of Common Stock Purchase Warrant “G” (18)
4.12           Form of Common Stock Purchase Warrant for Sand Hill Finance LLC (18)
4.13           Secured Convertible Debenture for Sand Hill Finance LLC (25)
4.14           Warrant Amendment Agreement with Sand Hill Finance LLC (25)
4.15           Form of Series Common Stock Purchase Warrant “N” (26)


                                                                       II- 5
4.16         Form of Senior Convertible Note (27)
4.17         Form of Series Common Stock Purchase Warrant “O” (27)
4.18         Form of Series Common Stock Purchase Warrant “P” (27)
4.19         Form of Series Common Stock Purchase Warrant “Q” (27)
4.20         Form of Series Common Stock Purchase Warrant “R” *
5.1          Opinion of Pearlman Schneider LLP *
10.1         Acquisition Agreement with North Orlando Sports Promotions, Inc. (1)
10.2         Asset Purchase Agreement with Raymond J. Hotaling (5)
10.3         2000 Management and Director Equity Incentive and Compensation Plan (6)
10.4         Stock Purchase Agreement with Health Span Sciences, Inc. (7)
10.4         Stock Purchase Agreement with Health Span Sciences, Inc. (7)
10.5         Stock Purchase and Exchange Agreement with Interlan Communications (9)
10.6         Preferred Stock Purchase Agreement dated March 30, 2005 (12)
10.7         Registration Rights Agreement with Barron Partners LP (12)
10.8         Asset and Stock Purchase Agreement for iPlicity, Inc.(16)
10.9         Asset and Stock Purchase Agreement for DevElements, Inc. of Virginia (15)
10.10        Form of Loan and Security Agreement with Comerica Bank (16)
10.11        Forbearance Agreement (16)
10.12        Sublease Agreement for principal executive offices (16)
10.13        Preferred Stock Purchase Agreement dated September 8, 2005 (18)
10.14        Registration Rights Agreement with Barron Partners LP (18)
10.15        Financing Agreement with Sand Hill Finance LLC (18)
10.16        Lease Agreement for principal executive offices (19)
10.17        Retailer Marketing Agreement with CompUSA (20)
10.18        Stock Purchase Agreement with Inline Corporation (21)
10.19        First Amendment to Stock Purchase Agreement with Inline Corporation (21)
10.20        Convertible Debenture with Sand Hill Finance LLC (22)
10.21        Stock Purchase Agreement for Sale of IceWEB Virginia, Inc. (23)
10.22        Series C Preferred Stock Purchase Agreement (24)
10.23        Form of Securities Purchase Agreement for senior note offering (27)
10.24        Form of subsidiary guarantee (27)
10.25        Form of Registration Rights Agreement for senior note offering (27)
10.26        Letter agreement dated August 16, 2011 by and between IceWEB, Inc. and Rodman & Renshaw LLC, as amended (27)
10.27        Form of Subscription Agreement *
10.28        Form of Registration Rights Agreement *
14.1         Code of Business Conduct and Ethics (16)
21.1         Subsidiaries of the registrant (16)
23.1         Consent of Sherb & Co., LLP *
23.2         Opinion of Pearlman Schneider LLP (included in Exhibit 5.1 hereto)*


*       filed herewith

(1)     Incorporated by reference to the Form 10-SB, file number 000-27865, filed with on October 28, 1999, as amended.
(2)     Incorporated by reference to the definitive Information Statement on Schedule 14C as filed on June 18, 2001.
(3)     Incorporated by reference to the definitive Information Statement on Schedule 14C as filed on June 26, 2001.
(4)     Incorporated by reference to the Report on Form 8-K as filed on June 6, 2001.
(5)     Incorporated by reference to the Report on Form 8-K as filed on July 26, 2001.
(6)     Incorporated by reference to the definitive Information Statement on Schedule 14C as filed on July 23, 2001.
(7)     Incorporated by reference to the Report on Form 8-K as filed on December 4, 2001.
(8)     Incorporated by reference to the Report on Form 8-K as filed on April 4, 2002.


                                                                 II- 6
(9)      Incorporated by reference to the Report on Form 8-K as filed on August 1, 2003.
(10)     Incorporated by reference to the Report on Form 8-K/A as filed on February 20, 2004.
(11)     Incorporated by reference to the definitive Information Statement on Schedule 14C as filed on August 20, 2004.
(12)     Incorporated by reference to the Report on Form 8-K as filed on April 5, 2005.
(13)     Incorporated by reference to the definitive Information Statement on Schedule14C as filed on April 4, 2005.
(14)     Incorporated by reference to Amendment No. 1 to the Report on Form 8-K/A as filed on February 20, 2004.
(15)     Incorporated by reference to the Report on Form 8-K as filed on July 23, 2004.
(16)     Incorporated by reference to the registration statement on Form SB-2, SEC file number 333-126898, as amended.
(17)     Incorporated by reference to our Annual Report on Form 10-KSB as filed on January 18, 2006.
(18)     Incorporated by reference to the Report on Form 8-K as filed on January 30, 2006.
(19)     Incorporated by reference to the registration statement on Form SB-2/A, SEC file number 333-126898 filed on January 30. 2006.
(20)     Incorporated by reference to the Report on Form 8-K as filed on June 22, 2006.
(21)     Incorporated by reference to the Report on Form 8-K as filed on January 3, 2009.
(22)     Incorporated by reference to the Report on Form 8-K as filed on December 1, 2009.
(23)     Incorporated by reference to the Report on Form 8-K as filed on April 15, 2010.
(24)     Incorporated by reference to the Report on Form 8-K as filed on July 31, 2010.
(25)     Incorporated by reference to the registration statement on Form S-1, SEC file number 333-167501, as amended.
(26)     Incorporated by reference to the Report on Form 8-K as filed on November 16, 2011.
(27)     Incorporated by reference to the Report on Form 8-K as filed on November 23, 2011.

ITEM 17. UNDERTAKINGS.

a.      The undersigned registrant hereby undertakes:

1.      To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

i.      To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

ii.      To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table
in the effective registration statement.

iii.    To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;

2.     That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

3.      To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the
termination of the offering.

4.      That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:


                                                                       II- 7
ii.      If the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an
offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to
be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made
in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by
reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of
sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately prior to such date of first use.

Insofar as indemnification for liabilities arising under the Securities Act of 1933, may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

                                                                  SIGNATURES

         Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Sterling, Virginia on the 17 th day of August, 2012.

                                                                           ICEWEB, INC.

                                                                           By:    /s/ Robert M. Howe III
                                                                           Robert M. Howe III. Chief Executive Officer

                                                            POWER OF ATTORNEY

           Each person whose signature appears below hereby constitutes and appoints Hal Compton, Sr. his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) and supplements to this Registration Statement, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to such
attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully
to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

         Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons
in the capacities and on the dates indicated.

Signature                                        Title                                                                Date
/s/ Robert M. Howe III                           Chief Executive Officer                                              August 17, 2012
Robert M. Howe III

/s/ Hal Compton, Sr.                             Chairman                                                             August 17, 2012
Hal Compton, Sr.

/s/ Mark B. Lucky                                Chief Financial Officer, principal financial and                     August 17, 2012
Mark B. Lucky                                    accounting officer


                                                                       II- 8
/s/ Nick Carosi, III         Director           August 17, 2012
Nick Carosi, III

/s/ Raymond H. Pirtle, Jr.   Director           August 17, 2012
Raymond H. Pirtle, Jr.

/s/ Jack Bush                Director           August 17, 2012
Jack Bush

/s/ Harry E. Soyster         Director           August 17, 2012
Harry E. Soyster


                                        II- 9
                                                             EXHIBIT INDEX

    No.          Description
        4.20     Form of Series Common Stock Purchase Warrant “R”
       10.27     Form of Subscription Agreement
       10.28     Form of Registration Rights Agreement
         5.1     Opinion of Schneider Weinberger LLP
        23.1     Consent of Sherb & Co., LP
        23.2     Consent of Schneider Weinberger LLP (included in Exhibit 5.1)




Exhibit 4.20

                                                          SERIES R WARRANT

NO. R-______                                                  ICEWEB, INC.                                                  ________ Shares


                                            WARRANT TO PURCHASE COMMON STOCK
                                                VOID AFTER 5:30 P.M., EASTERN

                                                  TIME, ON THE EXPIRATION DATE

THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE SOLD, PLEDGED,
HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION
OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE
EXEMPTIONS THEREFROM.

                   FOR VALUE RECEIVED, ICEWEB, INC., a Delaware corporation (the “ Company ”), hereby agrees to sell upon the terms
and on the conditions hereinafter set forth, but no later than 5:30 p.m., Eastern Time, on the Expiration Date (as hereinafter defined) to
________________ or registered assigns (the “ Holder ”), under the terms as hereinafter set forth, __________________ (_____________)
fully paid and non-assessable shares of the Company’s Common Stock, par value $0.001 per share (the “ Warrant Stock ”), at a purchase price
of $0.15 per share (the “ Warrant Price ”), pursuant to this warrant (this “ Warrant ”). The number of shares of Warrant Stock to be so issued
and the Warrant Price are subject to adjustment in certain events as hereinafter set forth. The term “ Common Stock ” shall mean, when used
herein, unless the context otherwise requires, the stock and other securities at the time receivable upon the exercise of this Warrant.

          Exercise of Warrant .

                   The Holder may exercise this Warrant according to its terms by surrendering this Warrant to the Company at the address set
forth in Section 9, the Notice of Exercise attached hereto having then been duly executed by the Holder, accompanied by cash, certified check
or bank draft in payment of the purchase price, in lawful money of the United States of America, for the number of shares of the Warrant Stock
specified in the Notice of Exercise, or as otherwise provided in this Warrant, prior to 5:30 p.m., Eastern Time, on _________, 2017 (the “
Expiration Date ”).


                                                                      1
                   Notwithstanding anything contained herein to the contrary, if at any time after twelve (12) months from the date of issuance
of this Warrant there is no effective registration statement registering, or no current prospectus available for, the resale of all of the shares of
Warrant Stock issuable hereunder, then the Holder may, in its sole discretion, exercise this Warrant in whole or in part by means of a “cashless
exercise” in lieu of making a cash payment, and the Holder shall then be entitled to receive a certificate for the number of shares of Warrant
Stock equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

                  (A) =     VWAP (as defined below) on the business day immediately preceding the date of such election;


                  (B) =     the Warrant Price of this Warrant, as adjusted; and


                  (X) =     the number of shares of Warrant Stock issuable upon exercise of this Warrant in accordance with the terms of this
                            Warrant by means of a cash exercise rather than a cashless exercise.


          For purposes of this Warrant, “ VWAP ” means, for any date, the price determined by the first of the following clauses that applies:
(a) if the Common Stock is then listed or quoted on a Trading Market (as defined below), the daily volume weighted average price of the
Common Stock for the ten (10) trading days prior to such date (or the nearest preceding date) on the Trading Market on which the Common
Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. New York City time to 4:00 p.m. New
York City time); (b) if the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Stock for the ten
(10) trading days prior to such date (or the nearest preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then listed or
quoted on the OTC Bulletin Board and if prices for the Common Stock are then reported on the OTC Markets operated by OTC Markets Group
Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the average bid price per share of the Common Stock
so reported for the twenty (20) trading days prior to such date; or (d) in all other cases, the fair market value of a share of Common Stock as
determined in good faith by the Company’s board of directors. For purposes of this Warrant, “ Trading Market ” means the following markets
or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the New York Stock Exchange, NYSE MKT
LLC, NASDAQ Capital Market, NASDAQ Global Market, NASDAQ Global Select Market, or OTC Bulletin Board.

                   This Warrant may be exercised in whole or in part so long as any exercise in part hereof would not involve the issuance of
fractional shares of Warrant Stock. If exercised in part, the Company shall deliver to the Holder a new Warrant, identical in form, in the name
of the Holder, evidencing the right to purchase the number of shares of Warrant Stock as to which this Warrant has not been exercised, which
new Warrant shall be signed by the Chairman, Chief Executive Officer, President and the Secretary of the Company. The term Warrant as used
herein shall include any subsequent Warrant issued as provided herein.

                   No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. The Company
shall eliminate the fractional interests by rounding any fraction up to the nearest whole number of shares.


                                                                         2
                   In the event of any exercise of the rights represented by this Warrant, a certificate or certificates for the Warrant Stock so
purchased, registered in the name of the Holder, shall be delivered to the Holder within a reasonable time after such rights shall have been so
exercised. The person or entity in whose name any certificate for the Warrant Stock is issued upon exercise of the rights represented by this
Warrant shall for all purposes be deemed to have become the holder of record of such shares immediately prior to the close of business on the
date on which the Warrant was surrendered and payment of the Warrant Price and any applicable taxes was made, irrespective of the date of
delivery of such certificate, except that, if the date of such surrender and payment is a date when the stock transfer books of the Company are
closed, such person shall be deemed to have become the holder of such shares at the opening of business on the next succeeding date on which
the stock transfer books are open. The Company shall pay any and all documentary stamp or similar issue or transfer taxes payable in respect of
the issue or delivery of shares of Common Stock on exercise of this Warrant.

         Disposition of Warrant Stock and Warrant .

                   The Holder hereby acknowledges that this Warrant and any Warrant Stock purchased pursuant hereto are, as of the date
hereof, not registered: (i) under the Act , on the ground that the issuance of this Warrant is exempt from registration under Section 4(2) of the
Act as not involving any public offering or (ii) under any applicable state securities law because the issuance of this Warrant does not involve
any public offering; and that the Company’s reliance on the Section 4(2) exemption of the Act and under applicable state securities laws is
predicated in part on the representations hereby made to the Company by the Holder that it is acquiring this Warrant and will acquire the
Warrant Stock for investment for its own account, with no present intention of dividing its participation with others or reselling or otherwise
distributing the same, subject, nevertheless, to any requirement of law that the disposition of its property shall at all times be within its control.

                   To the extent the Warrant or Warrant Stock has not been registered for resale pursuant to the Act, the Holder hereby agrees
that it will not sell or transfer all or any part of this Warrant and/or Warrant Stock unless and until it shall first have given notice to the
Company describing such sale or transfer and furnished to the Company either (i) an opinion, reasonably satisfactory to counsel for the
Company, of counsel (skilled in securities matters, selected by the Holder and reasonably satisfactory to the Company) to the effect that the
proposed sale or transfer may be made without registration under the Act and without registration or qualification under any state law, or (ii) an
interpretative letter from the Securities and Exchange Commission to the effect that no enforcement action will be recommended if the
proposed sale or transfer is made without registration under the Act.

                  If, at the time of issuance of the shares issuable upon exercise of this Warrant, no registration statement is in effect with
respect to such shares under applicable provisions of the Act, the Company may at its election require that the Holder provide the Company
with written reconfirmation of the Holder’s investment intent and that any stock certificate delivered to the Holder of a surrendered Warrant
shall bear legends reading substantially as follows:

         “THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
         OF 1933, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN
         EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 OR AN OPINION OF COUNSEL
         SATISFACTORY TO THE ISSUER OF THIS CERTIFICATE THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.”


                                                                          3
In addition, so long as the foregoing legend may remain on any stock certificate delivered to the Holder, the Company may maintain
appropriate “stop transfer” orders with respect to such certificates and the shares represented thereby on its books and records and with those to
whom it may delegate registrar and transfer functions.

         Reservation of Shares . The Company hereby agrees that at all times there shall be reserved for issuance upon the exercise of this
Warrant such number of shares of its Common Stock as shall be required for issuance upon exercise of this Warrant. The Company further
agrees that all shares which may be issued upon the exercise of the rights represented by this Warrant will be duly authorized and will, upon
issuance and against payment of the exercise price, be validly issued, fully paid and non-assessable, free from all taxes, liens, charges and
preemptive rights with respect to the issuance thereof, other than taxes, if any, in respect of any transfer occurring contemporaneously with
such issuance and other than transfer restrictions imposed by federal and state securities laws.

          Exchange, Transfer or Assignment of Warrant . This Warrant is exchangeable, without expense, at the option of the Holder, upon
presentation and surrender hereof to the Company or at the office of its stock transfer agent, if any, for other Warrants of different
denominations, entitling the Holder or Holders thereof to purchase in the aggregate the same number of shares of Common Stock purchasable
hereunder. Upon surrender of this Warrant to the Company or at the office of its stock transfer agent, if any, with the Assignment Form
annexed hereto duly executed and funds sufficient to pay any transfer tax, the Company shall, without charge, execute and deliver a new
Warrant in the name of the assignee named in such instrument of assignment and this Warrant shall promptly be canceled. This Warrant may
be divided or combined with other Warrants that carry the same rights upon presentation hereof at the office of the Company or at the office of
its stock transfer agent, if any, together with a written notice specifying the names and denominations in which new Warrants are to be issued
and signed by the Holder hereof.

         Capital Adjustments . This Warrant is subject to the following further provisions:

                   Recapitalization, Reclassification and Succession . If any recapitalization of the Company or reclassification of its Common
Stock or any merger or consolidation of the Company into or with a corporation or other business entity, or the sale or transfer of all or
substantially all of the Company’s assets or of any successor corporation’s assets to any other corporation or business entity (any such
corporation or other business entity being included within the meaning of the term “successor corporation”) shall be effected, at any time while
this Warrant remains outstanding and unexpired, then, as a condition of such recapitalization, reclassification, merger, consolidation, sale or
transfer, lawful and adequate provision shall be made whereby the Holder of this Warrant thereafter shall have the right to receive upon the
exercise hereof as provided in Section 1 and in lieu of the shares of Common Stock immediately theretofore issuable upon the exercise of this
Warrant, such shares of capital stock, securities or other property as may be issued or payable with respect to or in exchange for a number of
outstanding shares of Common Stock equal to the number of shares of Common Stock immediately theretofore issuable upon the exercise of
this Warrant had such recapitalization, reclassification, merger, consolidation, sale or transfer not taken place, and in each such case, the terms
of this Warrant shall be applicable to the shares of stock or other securities or property receivable upon the exercise of this Warrant after such
consummation.


                                                                        4
                 Subdivision or Combination of Shares . If the Company at any time while this Warrant remains outstanding and unexpired
shall subdivide or combine its Common Stock, the number of shares of Warrant Stock purchasable upon exercise of this Warrant and the
Warrant Price shall be proportionately adjusted.

                  Stock Dividends and Distributions . If the Company at any time while this Warrant is outstanding and unexpired shall issue
or pay the holders of its Common Stock, or take a record of the holders of its Common Stock for the purpose of entitling them to receive, a
dividend payable in, or other distribution of, Common Stock, then (i) the Warrant Price shall be adjusted in accordance with Section 5(f) and
(ii) the number of shares of Warrant Stock purchasable upon exercise of this Warrant shall be adjusted to the number of shares of Common
Stock that the Holder would have owned immediately following such action had this Warrant been exercised immediately prior thereto.

                   Stock and Rights Offering to Stockholders . If the Company shall at any time after the date of issuance of this Warrant
distribute to all holders of its Common Stock any shares of capital stock of the Company (other than Common Stock) or evidences of its
indebtedness or assets (excluding cash dividends or distributions paid from retained earnings or current year’s or prior year’s earnings of the
Company) or rights or warrants to subscribe for or purchase any of its securities (excluding those referred to in the immediately preceding
paragraph) (any of the foregoing being hereinafter in this paragraph called the “ Securities ”), then in each such case, the Company shall
reserve shares or other units of such Securities for distribution to the Holder upon exercise of this Warrant so that, in addition to the shares of
the Common Stock to which such Holder is entitled, such Holder will receive upon such exercise the amount and kind of such Securities which
such Holder would have received if the Holder had, immediately prior to the record date for the distribution of the Securities, exercised this
Warrant.

                  Warrant Price Adjustment . Except as otherwise provided herein, whenever the number of shares of Warrant Stock
purchasable upon exercise of this Warrant is adjusted, as herein provided, the Warrant Price payable upon the exercise of this Warrant shall be
adjusted to that price determined by multiplying the Warrant Price immediately prior to such adjustment by a fraction (i) the numerator of
which shall be the number of shares of Warrant Stock purchasable upon exercise of this Warrant immediately prior to such adjustment, and (ii)
the denominator of which shall be the number of shares of Warrant Stock purchasable upon exercise of this Warrant immediately thereafter.

                  Certain Shares Excluded . The number of shares of Common Stock outstanding at any given time for purposes of the
adjustments set forth in this Section 5 shall exclude any shares then directly or indirectly held in the treasury of the Company.


                                                                        5
                   Deferral and Cumulation of De Minimis Adjustments . The Company shall not be required to make any adjustment pursuant
to this Section 5 if the amount of such adjustment would be less than one percent (1%) of the Warrant Price in effect immediately before the
event that would otherwise have given rise to such adjustment. In such case, however, any adjustment that would otherwise have been required
to be made shall be made at the time of and together with the next subsequent adjustment which, together with any adjustment or adjustments
so carried forward, shall amount to not less than one percent (1%) of the Warrant Price in effect immediately before the event giving rise to
such next subsequent adjustment.

                 Duration of Adjustment . Following each computation or readjustment as provided in this Section 5, the new adjusted
Warrant Price and number of shares of Warrant Stock purchasable upon exercise of this Warrant shall remain in effect until a further
computation or readjustment thereof is required.

         Call Provision . Subject to the terms and conditions set forth herein, prior to the Expiration Date, upon twenty (20) business days prior
written notice to the Holder (each, a “ Call Notice ”) following the period in which the last sale price of the Company’s Common Stock as
reported on the Trading Market on which its Common Stock is then listed or quoted equals or exceeds $0.25 per share for ten (10) consecutive
trading days and providing that the shares of Common Stock issuable upon the exercise of the Warrant are subject to an effective registration
statement, the Company shall have the right to call any or all of the Warrant at a call price of $0.001 per underlying share (the " Call Price ").
Warrant holders shall have the period from the date of the Call Notice, which shall be delivered to the Holder pursuant to Section 11 hereof,
until 5:30 p.m., Eastern time, on the twentieth (20th) day following the Call Notice (the " Call Date ") to exercise the Warrant pursuant to the
terms hereof. Any Warrants which have been called but remain unexercised by the Call Date shall automatically terminate and no longer entitle
the Holder to exercise such Warrant or to receive any consideration therefor, other than the Call Price. For any Warrants which are not
exercised by the Call Date, the Company shall promptly as possible following the Call Date pay the Call Price to the Holder of any Warrants
which have been called and not exercised.


                                                                        6
          Limitation on Exercises . The Company shall not affect the exercise of this Warrant, and the Holder shall not have the right to exercise
this Warrant, to the extent that after giving effect to such exercise, the Holder (together with such Holder’s affiliates) would beneficially own in
excess of 4.99% of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing
sentence, the aggregate number of shares of Common Stock beneficially owned by such Holder and its affiliates shall include the number of
shares of Common Stock issuable upon exercise of this Warrant with respect to which the determination of such sentence is being made, but
shall exclude shares of Common Stock which would be issuable upon (A) exercise of the remaining, unexercised portion of this Warrant
beneficially owned by such Holder and its affiliates and (B) exercise or conversion of the unexercised or unconverted portion of any other
securities of the Company beneficially owned by such Person and its affiliates (including, without limitation, any convertible notes or
convertible preferred stock or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein. Except as
set forth in the preceding sentence, for purposes of this paragraph, beneficial ownership shall be calculated in accordance with Section 13(d) of
the Securities Exchange Act of 1934, as amended. To the extent that the limitation contained in this Section 7 applies, the determination of
whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any affiliate) and of which portion of this
Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the
Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any affiliate)
and of which portion of this Warrant is exercisable, in each case subject to such aggregate percentage limitation, and the Company shall have
no obligation to verify or confirm the accuracy of the determination. For purposes of this Warrant, in determining the number of outstanding
shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (1) the Company's most
recent Form 10-K, Form 10-Q, Current Report on Form 8-K or other public filing with the Securities and Exchange Commission, as the case
may be, (2) a more recent public announcement by the Company or (3) any other notice by the Company setting forth the number of shares of
Common Stock outstanding. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one (1)
business day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company,
including this Warrant, by the Holder and its affiliates since the date as of which such number of outstanding shares of Common Stock was
reported. The restriction described in this Section 7 may be waived, in whole or in part, upon sixty-one (61) days prior notice from the Holder
to the Company to increase such percentage up to 9.99%, but not in excess of 9.99%. The provisions of this paragraph shall be construed and
implemented in a manner otherwise than in strict conformity with the terms of this Section 6 to correct this paragraph (or any portion hereof)
which may be defective or inconsistent with the intended beneficial ownership limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such limitation.

         Notice to Holders .

                  Notice of Record Date . In case:

         the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time receivable upon the
         exercise of this Warrant) for the purpose of entitling them to receive any dividend (other than a cash dividend payable out of earned
         surplus of the Company) or other distribution, or any right to subscribe for or purchase any shares of stock of any class or any other
         securities, or to receive any other right;

         of any capital reorganization of the Company, any reclassification of the capital stock of the Company, any consolidation with or
         merger of the Company into another corporation, or any conveyance of all or substantially all of the assets of the Company to another
         corporation; or


                                                                         7
         of any voluntary dissolution, liquidation or winding-up of the Company;

then, and in each such case, the Company will mail or cause to be mailed to the Holder hereof at the time outstanding a notice specifying, as the
case may be, (i) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and
character of such dividend, distribution or right, or (ii) the date on which such reorganization, reclassification, consolidation, merger,
conveyance, dissolution, liquidation or winding-up is to take place, and the time, if any, is to be fixed, as of which the holders of record of
Common Stock (or such stock or securities at the time receivable upon the exercise of this Warrant) shall be entitled to exchange their shares of
Common Stock (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification,
consolidation, merger, conveyance, dissolution or winding-up. Such notice shall be mailed at least thirty (30) days prior to the record date
therein specified, or if no record date shall have been specified therein, at least thirty (30) days prior to such specified date, provided, however,
failure to provide any such notice shall not affect the validity of such transaction.

                   Certificate of Adjustment . Whenever any adjustment shall be made pursuant to Section 5 hereof, the Company shall
promptly make a certificate signed by its Chairman, Chief Executive Officer, President, Vice President, Chief Financial Officer or Treasurer,
setting forth in reasonable detail the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was
calculated and the Warrant Price and number of shares of Warrant Stock purchasable upon exercise of this Warrant after giving effect to such
adjustment, and shall promptly cause copies of such certificates to be mailed (by first class mail, postage prepaid) to the Holder of this Warrant.

         Loss, Theft, Destruction or Mutilation . Upon receipt by the Company of evidence satisfactory to it, in the exercise of its reasonable
discretion, of the ownership and the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to the Company and, in the case of mutilation, upon surrender and cancellation thereof, the Company will
execute and deliver in lieu thereof, without expense to the Holder, a new Warrant of like tenor dated the date hereof.

        Warrant Holder Not a Stockholder . The Holder of this Warrant, as such, shall not be entitled by reason of this Warrant to any rights
whatsoever as a stockholder of the Company.

          Notices . Any notice required or contemplated by this Warrant shall be deemed to have been duly given if transmitted by registered or
certified mail, return receipt requested, or nationally recognized overnight delivery service , to the Company at its principal executive offices
located at 22900 Shaw Road, Suite 111, Sterling, Virginia 20166, Attention: Chief Financial Officer, or to the Holder at the name and address
set forth in the Warrant Register maintained by the Company.

       Choice of Law . THIS WARRANT IS ISSUED UNDER AND SHALL FOR ALL PURPOSES BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.

         Jurisdiction and Venue . The Company and Holder hereby agree that any dispute which may arise between them arising out of or in
connection with this Warrant shall be adjudicated before a court located in New York County, New York and they hereby submit to the
exclusive jurisdiction of the federal and state courts of the State of York located in New York County with respect to any action or legal
proceeding commenced by any party, and irrevocably waive any objection they now or hereafter may have respecting the venue of any such
action or proceeding brought in such a court or respecting the fact that such court is an inconvenient forum, relating to or arising out of this
Warrant or any acts or omissions relating to the sale of the securities hereunder, and consent to the service of process in any such action or legal
proceeding by means of registered or certified mail, return receipt requested, in care of the address set forth herein or such other address as
either party shall furnish in writing to the other.

                                                        [SIGNATURE PAGE FOLLOWS]


                                                                         8
                   IN WITNESS WHEREOF, the Company has duly caused this Warrant to be signed on its behalf, in its corporate name and
by its duly authorized officers, as of this __ day of _____________________, 2012.

                                                                  ICEWEB, INC.

                                                                  By:
                                                                        Name:
                                                                        Title:


                                                                 9
                                                           NOTICE OF EXERCISE

TO:      IceWEB, Inc.
         22900 Shaw Road, Suite 111
         Sterling, VA 20166
         Attention: Chief Financial Officer
         Tel: (571) 287-2380
         Fax: (571) 287-2396

          The undersigned hereby elects to purchase ______________ shares of Warrant Stock of the Company pursuant to the terms of the
attached Warrant to Purchase Common Stock, and tenders herewith payment of the exercise price in full, together with all applicable transfer
taxes, if any.

         Payment shall take the form of (check applicable box):

                  in lawful money of the United States; or

                 if permitted, the cancellation of __________ shares of Warrant Stock in order to exercise this Warrant with respect to
         ____________ shares of Warrant Stock (using a VWAP of $______ for this calculation), in accordance with the formula and
         procedure set forth in subsection 1(b).

                 if permitted, the cancellation of such number of shares of Warrant Stock as is necessary, in accordance with the formula and
         procedure set forth in subsection 1(b), to exercise this Warrant with respect to the maximum number of shares of Warrant Stock
         purchasable pursuant to a cashless exercise.

          Please issue a certificate or certificates representing said shares of Warrant Stock in the name of the undersigned or in such other name
as is specified below:



          The shares of Warrant Stock shall be delivered to the following DWAC Account Number, if permitted, or by physical delivery of a
certificate to:




         Accredited Investor . The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of
1933, as amended.


                                                                        10
                                                         [SIGNATURE OF HOLDER]

Name of Investing Entity:

Signature of Authorized Signatory of Investing Entity:

Name and Title of Authorized Signatory:

Date:


                                                                  11
                                                        ASSIGNMENT FORM

                                                (To assign the foregoing warrant, execute
                                               this form and supply required information.
                                              Do not use this form to exercise the warrant.)

         FOR VALUE RECEIVED, all of or ___________ shares of the foregoing Warrant and all rights evidenced thereby are hereby
assigned to

_______________________________________ whose address is

_____________________________________________

_____________________________________________

                                                                                                             Dated: ____________,

Holder’s Name:

Holder’s Signature:

Name and Title of Signatory:

Holder’s Address:

Signature Guaranteed:

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or
enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a
fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.


                                                                   12
                                                           EXHIBITS 5.1 and 23.2

                                                      PEARLMAN SCHNEIDER LLP
                                                  2200 Corporate Boulevard, N.W., Suite 210
                                                         Boca Raton, Florida 33432
                                                               (561) 362-9595

                                                                                                August 17, 2012

IceWEB, Inc.
22900 Shaw Road, Suite 111
Sterling, VA 20166

RE:      Registration Statement On Form S-1 (the "Registration Statement") of IceWEB, Inc., a Delaware corporation (the "Company")

Ladies and Gentlemen:

          This opinion is submitted pursuant to the applicable rules of the Securities and Exchange Commission in connection with the
registration for public resale of an aggregate of 39,258,270 shares (the "Registerable Shares") of the Company's common stock, $0.0001 par
value per share ("Common Stock"), consisting of 13,455,958 shares of outstanding Common Stock (the “Outstanding Shares”) and 25,802,312
shares of Common Stock issuable upon exercise of common stock purchase warrants (the “Warrant Shares”), all as described in the
Registration Statement.

         In connection therewith, we have examined and relied upon original, certified, conformed, photostat or other copies of (a) the
Certificate of Incorporation, as amended, and Bylaws of the Company; (b) resolutions of the Board of directors of the Company authorizing
the issuance of the Registerable Shares; (c) the Registration Statement and the exhibits thereto; (d) the agreements, instruments and documents
pursuant to which the Registerable Shares were or are to be issued; and (e) such other matters of law as we have deemed necessary for the
expression of the opinion herein contained. In all such examinations, we have assumed the genuineness of all signatures on original documents,
and the conformity to originals or certified documents of all copies submitted to us as conformed, photostat or other copies. In passing upon
certain corporate records and documents of the Company, we have necessarily assumed the correctness and completeness of the statements
made or included therein by the Company, and we express no opinion thereon. As to the various questions of fact material to this opinion, we
have relied, to the extent we deemed reasonably appropriate, upon representations or certificates of officers or directors of the Company and
upon documents, records and instruments furnished to us by the Company, without independently checking or verifying the accuracy of such
documents, records and instruments.

      This opinion is limited to the laws of the State of Delaware. In rendering this opinion, we have assumed compliance with all other laws,
including federal laws and state securities laws.

        Based upon and subject to the foregoing, we are of the opinion that the Outstanding Shares are legally issued, fully paid and
non-assessable and the Warrant Shares, when issued in accordance with their terms and upon receipt by the Company of the agreed upon
consideration therefor, will be legally issued, fully paid and non-assessable.

        We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name under the caption
"Legal Matters" in the prospectus forming a part of the Registration Statement.

                                                                        Very truly yours,

                                                                        /s/ Pearlman Schneider LLP
                                                                        Pearlman Schneider LLP
Exhibit 10.27

                                                      SUBSCRIPTION AGREEMENT

                  SUBSCRIPTION AGREEMENT made as of this ___ day of ____________, 2012, between IceWEB, Inc., a Delaware
corporation (the “ Company ”), and the undersigned (the “ Subscriber ”).

                   WHEREAS, pursuant to a Confidential Private Placement Memorandum dated June __, 2012 (the “ PPM ”), the Company
is offering in a private placement (the “ Offering ”) to accredited investors a minimum of 833,334 Units (the “ Minimum Offering ”) and a
maximum of 20,833,334 Units (the “ Maximum Offering ”), plus up to an additional 8,333,334 Units to cover over-allotments, at a purchase
price of $0.12 per Unit, with each Unit (the “ Units ”) consisting of one share of the Company’s common stock, par value $0.001 per share (the
“ Common Stock ”), one five-year detachable Series R warrant (individually, a “ Warrant ” and if more than one, the “ Warrants ”) to
purchase one share of Common Stock with an exercise price of $0.15 per share. Each Warrant is exercisable for a term of sixty (60) months
following closing on Subscriber’s subscription to the Units. The Warrants are callable by the Company in the event the closing price of the
Company’s Shares on the OTC Bulletin Board closes at or above $0.25 per share for ten (10) consecutive trading days providing that the
Shares underlying the Warrants are covered by an effective registration statement; and

                 WHEREAS , the Subscriber desires to subscribe for the number of Units set forth on the signature page hereof, on the terms
and conditions hereinafter set forth.

                  NOW, THEREFORE , for and in consideration of the premises and the mutual covenants hereinafter set forth, the parties
hereto do hereby agree as follows:

         I.       SUBSCRIPTION FOR AND REPRESENTATIONS AND COVENANTS OF SUBSCRIBER

                    1.1       Subject to the terms and conditions hereinafter set forth, the Subscriber hereby subscribes for and agrees to
   purchase from the Company such number of Units set forth upon the signature page hereof, at a price equal to $0.12 per Unit, and the
   Company agrees to sell such to the Subscriber for said purchase price, subject to the Company’s right to sell to the Subscriber such lesser
   number of (or no) Units as the Company may, in its sole discretion, deem necessary or desirable. The purchase price is payable by wire
   transfer of immediately available funds, pursuant to the wire instructions set forth in the Memorandum or by check payable to SunTrust
   Bank, as Escrow Agent for IceWEB Inc.

                       1.2       The Subscriber recognizes that the purchase of Units involves a high degree of risk in that (i) an investment in
   the Company is highly speculative and only investors who can afford the loss of their entire investment should consider investing in the
   Company and the Units; (ii) the Units are not registered under the Securities Act of 1933, as amended (the “ Act ”), or any state securities
   law; (iii) there is no trading market for the Units, none is likely ever to develop, and the Subscriber may not be able to liquidate his, her or
   its investment; (iv) transferability of the Units is extremely limited; and (v) an investor could suffer the loss of his, her or its entire
   investment.


                                                                        1
                  1.3      The Subscriber is an “accredited investor,” as such term in defined in Rule 501 of Regulation D promulgated
under the Act, and the Subscriber is able to bear the economic risk of an investment in the Units.

                 1.4       The Subscriber acknowledges receipt and careful review of the PPM, all supplements to the PPM, and all other
documents furnished in connection with this transaction by the Company, including but not limited to the exhibits to the PPM (collectively,
the “ Offering Documents ”), and has been furnished by the Company during the course of this transaction with all information regarding
the Company which the Subscriber has requested or desires to know; and the Subscriber has been afforded the opportunity to ask questions
of and receive answers from duly authorized officers or other representatives of the Company concerning the terms and conditions of the
Offering, and any additional information which the Subscriber has requested. The Subscriber has not relied on any statements made or
information provided by any placement agent retained by the Company in connection with this Offering.

                  1.5       The Subscriber acknowledges that the purchase of the Units may involve tax consequences to the Subscriber
and that the contents of the Offering Documents do not contain tax advice. The Subscriber acknowledges that the Subscriber must retain
his, her or its own professional advisors to evaluate the tax and other consequences to the Subscriber of an investment in the Units. The
Subscriber acknowledges that it is the responsibility of the Subscriber to determine the appropriateness and the merits of a corporate entity
to own the Subscriber’s Units and the corporate structure of such entity.

                   1.6       The Subscriber acknowledges that this Offering has not been reviewed by the Securities and Exchange
Commission (the “ SEC ”) or any state securities commission, and that no federal or state agency has made any finding or determination
regarding the fairness or merits of the Offering. The Subscriber represents that the Units are being purchased for his, her or its own account,
for investment only, and not with a view toward distribution or resale to others. The Subscriber agrees that he, she or it will not sell or
otherwise transfer the Units unless they are registered under the Act or unless an exemption from such registration is available.

                   1.7       Except as set forth in the Registration Rights Agreement (as defined in the PPM), the Subscriber understands
that they will not be able to resell the Units, the Common Stock, the Warrants and the shares of Common Stock issuable upon exercise of
the Warrants (the “Warrant Shares”) until all of the conditions under Rule 144 have been satisfied however there can be no assurance that
the conditions necessary to permit such sales under Rule 144 will always be satisfied.


                                                                    2
                    1.8       The Subscriber understands that the Units have not been registered under the Act by reason of a claimed
exemption under the provisions of the Act which depends, in part, upon his, her or its investment intention. In this connection, the
Subscriber understands that it is the position of the SEC that the statutory basis for such exemption would not be present if his, her or its
representation merely meant that his, her or its present intention was to hold such securities for a short period, such as the capital gains
period of tax statutes, for a deferred sale, for a market rise, assuming that a market develops, or for any other fixed period. The Subscriber
realizes that, in the view of the SEC, a purchase now with an intent to resell would represent a purchase with an intent inconsistent with his,
her or its representation to the Company and the SEC might regard such a sale or disposition as a deferred sale, for which such exemption is
not available.

                   1.9        The Subscriber consents to the placement of a legend on any certificate or other document evidencing the
Common Stock or the Warrants stating that such securities have not been registered under the Act and setting forth or referring to the
restrictions on transferability and sale thereof.

                 1.10      The Subscriber understands that the Company will review and rely on this Subscription Agreement without
making any independent investigation; and it is agreed that the Company reserves the unrestricted right to reject or limit any subscription
and to withdraw the Offering at any time.

                 1.11     The Subscriber hereby represents that the address of the Subscriber furnished at the end of this Subscription
Agreement is the undersigned’s principal residence, if the Subscriber is an individual, or its principal business address if it is a corporation
or other entity.

                   1.12    The Subscriber acknowledges that if the Subscriber is a Registered Representative of a Financial Industry
Regulatory Authority, Inc. (“ FINRA ”) member firm, the Subscriber must give such firm the notice required by the FINRA’s Conduct
Rules, receipt of which must be acknowledged by such firm on the signature page hereof.

                    1.13      The Subscriber understands that, pursuant to the terms of the Offering as set forth in the PPM, the Company
must receive subscriptions for the Minimum Offering in order to close on the sale of any Units and that persons affiliated with the Company
or its consultants, advisors, or placement agents may subscribe for Units, in which case the Company may accept subscriptions from such
affiliated parties in order to reach the Minimum Offering; and that, accordingly, no investor should conclude that achieving the Minimum
Offering is the result of any independent assessment of the merits or advantages of the Offering or the Company made by Subscribers in the
Minimum Offering.

                   1.14      The Subscriber hereby represents that, except as expressly set forth in the Offering Documents, no
representations or warranties have been made to the Subscriber by the Company or any agent, employee or affiliate of the Company and, in
entering into this transaction, the Subscriber is not relying on any information other than that contained in the Offering Documents and the
results of independent investigation by the Subscriber.

     II.       REPRESENTATIONS BY THE COMPANY

                  2.1        The Company, upon taking up and accepting this Subscription, represents and warrants in all material respects
to the Purchaser, with the intent that the Purchaser will rely thereon in making this Subscription, that:


                                                                     3
(a)        The Company and each of its Subsidiaries, if any, is a corporation or other entity duly
organized, validly existing and in good standing under the laws of the jurisdiction in which it is
incorporated or organized, with full power and authority (corporate and other) to own, lease, use and
operate its properties and to carry on its business as and where now owned, leased, used, operated and
conducted. The Company is duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which its ownership or use of property or the nature of the business
conducted by it makes such qualification necessary except where the failure to be so qualified or in
good standing would not have a Material Adverse Effect. For purpose of this Agreement, (i) “
Subsidiaries ” shall mean any corporation or other entity or organization, whether incorporated or
unincorporated, in which the Company owns, directly or indirectly, any equity or other ownership
interest or otherwise controls through contract or otherwise, and (ii) a “ Material Adverse Effect ”
shall mean a material adverse effect on the financial condition, results of operations, properties or
business of the Company taken as a whole.

(b)      (i) The Company has all requisite corporate power and authority to enter into and perform the
Transaction Documents and to consummate the transactions contemplated hereby and thereby and to
issue the Units, in accordance with the terms hereof and thereof, (ii) the execution and delivery of the
Transaction Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby (including without limitation, the issuance of the Units) have been
duly authorized by the Company’s Board of Directors and no further consent or authorization of the
Company, its Board of Directors, or its stockholders, is required, (iii) each of the Transaction
Documents has been duly executed and delivered by the Company by its authorized representative, and
such authorized representative is a true and official representative with authority to sign each such
document and the other documents or certificates executed in connection herewith and bind the
Company accordingly, and (iv) each of the Transaction Documents constitutes, and upon execution and
delivery thereof by the Company will constitute, a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except to the extent limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors’ rights and general principles of equity that restrict the availability of
equitable or legal remedies. For purpose of this Agreement, “ Transaction Documents ” shall mean
this Agreement, the Registration Rights Agreement and the Escrow Agreement entered into in
connection with this Offering.


                                 4
(c)      The Units and the Warrants have been duly and validly authorized and will be duly and validly
issued at closing of the Offering, and constitute legal, valid and binding obligations of the Company.
The Common Stock and the Warrants Shares have been duly and validly authorized and, when issued at
the closing or upon exercise of and in accordance with the Warrants, will be validly issued, fully paid
and non-assessable and free from all taxes or liens with respect to the issue thereof and shall not be
subject to preemptive rights or other similar rights of stockholders of the Company. Subject to the
accuracy of the representations and warranties of the Subscribers to this Agreement, the offer and
issuance by the Company of the Units is exempt from registration under the Act.

(d)        The execution, delivery and performance of the Transaction Documents by the Company and
the consummation by the Company of the transactions contemplated hereby and thereby will not: (i)
conflict with or result in a violation of any provision of the Certificate of Incorporation or By-laws or
(ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event
which with notice or lapse of time or both could become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, patent
license or instrument to which the Company or any of its Subsidiaries is a party, except for possible
violations, conflicts or defaults as would not, individually or in the aggregate, have a Material Adverse
Effect, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations and regulations of any self-regulatory organizations to
which the Company or its securities are subject) applicable to the Company or any of its Subsidiaries or
by which any property or asset of the Company or any of its Subsidiaries is bound or affected. Neither
the Company nor any of its Subsidiaries is in violation of its Certificate of Incorporation, By-laws or
other organizational documents. Neither the Company nor any of its Subsidiaries is in default (and no
event has occurred which with notice or lapse of time or both could put the Company or any of its
Subsidiaries in default) under, and neither the Company nor any of its Subsidiaries has taken any action
or failed to take any action that would give to others any rights of termination, amendment, acceleration
or cancellation of, any agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party or by which any property or assets of the Company or any of its Subsidiaries is
bound or affected, or for possible defaults as would not, individually or in the aggregate, have a
Material Adverse Effect. The businesses of the Company and its Subsidiaries are not being conducted
in violation of any law, rule ordinance or regulation of any governmental entity, except for possible
violations which would not, individually or in the aggregate, have a Material Adverse Effect. Except as
required under the Act, the Securities Exchange Act of 1934, as amended, and any applicable state
securities laws, the Company is not required to obtain any consent, authorization or order of, or make
any filing or registration with, any court, governmental agency, regulatory agency, self regulatory
organization or stock market or any third party in order for it to execute, deliver or perform any of its
obligations under this Agreement or to issue and sell the Shares in accordance with the terms hereof.
All consents, authorizations, orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof.


                                 5
(e)       As of June 11, 2012, the authorized capital stock of the Company consists of (i) 1,000,000,000
shares of Common Stock, of which 172,899,427 shares are issued and outstanding, 4,012,162 shares are
reserved for issuance pursuant to stock options granted under the Company’s equity compensation
plans, and 48,117,488 shares are reserved for issuance pursuant to warrants to purchase Common Stock,
and (ii) 10,000,000 shares of preferred stock, par value $0.001 per share, of which 626,667 shares are
issued and outstanding. Except as described above or in the Memorandum, (i) there are no outstanding
options, warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal, agreements,
understandings, claims or other commitments or rights of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for any shares of capital stock of the Company or
any of its Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is or may
become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries, (ii)
there are no agreements or arrangements under which the Company or any of its Subsidiaries is
obligated to register the sale of any of its or their securities under the Act (except for the registration
rights provisions contained herein) and (iii) except as set forth on Schedule 2.1(e) there are no
anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any
agreement providing rights to security holders) that will be triggered by the issuance of the Shares. All
of such outstanding shares of capital stock are, or upon issuance will be, duly authorized, validly issued,
fully paid and nonassessable. No shares of capital stock of the Company are subject to preemptive
rights or any other similar rights of the stockholders of the Company or any lien imposed through the
actions or failure to act of the Company.


                                6
(f)      The Company and each of its Subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals and
orders necessary to own, lease and operate its properties and to carry on its business as it is now being
conducted (collectively, the “ Company Permits ”), and there is no action pending or, to the
knowledge of the Company, threatened regarding suspension or cancellation of any of the Company
Permits. Neither the Company nor any of its Subsidiaries is in conflict with, or in default or violation of,
any of the Company Permits, except for any such conflicts, defaults or violations which, individually or
in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Neither the
Company nor any of its Subsidiaries has received any notification with respect to possible conflicts,
defaults or violations of applicable laws, except for notices relating to possible conflicts, defaults or
violations, which conflicts, defaults or violations would not have a Material Adverse Effect.

(g)       Except as set forth in the Memorandum, there is no action, suit, claim, proceeding, inquiry or
investigation before or by any court, public board, government agency, self-regulatory organization or
body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or
affecting the Company or any of its Subsidiaries, or their respective businesses, properties or assets or
their officers or directors in their capacity as such, that would have a Material Adverse Effect. The
Company is unaware of any facts or circumstances which might give rise to any of the foregoing. There
has not been, and to the knowledge of the Company, there is not pending or contemplated, any
investigation by the SEC involving the Company, any of its Subsidiaries or any current or former
director or executive officer of the Company or any of its Subsidiaries.


                                7
(h)       The Company confirms that neither it nor any other person acting on its behalf has provided
any of the Subscribers or their agents or counsel with any information that constitutes or could
reasonably be expected to constitute material, non-public information concerning the Company or any
of its Subsidiaries, other than the existence of the transactions contemplated by this Agreement and the
other Transaction Documents. The Company understands and confirms that each of the Subscribers will
rely on the foregoing representations in effecting transactions in securities of the Company. All
disclosure provided to the Subscribers regarding the Company and its Subsidiaries, their businesses and
the transactions contemplated hereby, furnished by or on behalf of the Company or any of its
Subsidiaries is true and correct in all material respects and does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading. Each press release issued
by the Company or any of its Subsidiaries during the twelve (12) months preceding the date of this
Agreement did not at the time of release contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading. No event or circumstance has
occurred or information exists with respect to the Company or any of its Subsidiaries or its or their
business, properties, liabilities, results of operations or financial conditions, which, under applicable
law, rule or regulation, requires public disclosure at or before the date hereof or announcement by the
Company but which has not been so publicly disclosed. The Company acknowledges and agrees that no
Subscribers makes or has made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section I.


                                8
(i)      The Company owns, is licensed or otherwise has adequate rights to use Company technology
(including but not limited to patented, patentable and unpatented inventions and unpatentable
proprietary or confidential information, systems or procedures), designs, processes, trademarks, trade
secrets, know how, copyrights and other works of authorship, computer programs and technical data
and information that are or could reasonably be expected to be material to its business as currently
conducted or proposed to be conducted or to the development, manufacture, operation and sale of any
products and services sold or proposed to be sold by any of the Company (collectively, the “
Intellectual Property ”). The Company has not received any threat of or notice of infringement of or
conflict with asserted rights of others with respect to any Intellectual Property. Except as set forth in the
Offering Documents, the Company is not obligated or under any liability whatsoever to make any
material payment by way of royalties, fees or otherwise to any owner or licensee of, or other claimant
to, any Intellectual Property, with respect to the use thereof or in connection with the conduct of its
businesses or otherwise. The Company has taken reasonable security measures to protect the secrecy,
confidentiality and value of the Intellectual Property in all material aspects, including, but not limited to
complying with all duty of disclosure requirements before the U.S. Patent and Trademark Office and
any other non-U.S. Patent Offices as appropriate, and has no reason to believe that such Intellectual
Property is not or, if not yet patented or registered, would not be, valid and enforceable against an
unauthorized user.

(j)      No consent, approval, authorization or order of, or any filing or declaration with, any court or
governmental agency or body is required in connection with the authorization, issuance, transfer, sale or
delivery of the Units by the Company, in connection with the execution, delivery and performance of
this Agreement by the Company.

(k)       Neither the Company, nor any of its Subsidiaries or affiliates, nor any Person acting on its or
their behalf, has engaged in any form of general solicitation or general advertising (within the meaning
of Regulation D) in connection with the offer or sale of the Units. The Company shall be responsible for
the payment of any placement agent’s fees, financial advisory fees, or brokers’ commissions (other than
for persons engaged by any Subscriber or its investment advisor) relating to or arising out of the
transactions contemplated hereby. Other than Meyers Associates, LP (the “ Placement Agent ”),
neither the Company nor any of its Subsidiaries has engaged any placement agent or other agent in
connection with the offer or sale of the Units.

(l)      Neither the Company nor any of its Subsidiaries has, and, to the knowledge of the Company,
no person acting on their behalf has, directly or indirectly, (i) taken any action designed to cause or to
result in the stabilization or manipulation of the price of any security of the Company or any of its
Subsidiaries to facilitate the sale or resale of any of the Units, (ii) sold, bid for, purchased, or paid any
compensation for soliciting purchases of, any of the Units (other than the Placement Agent), or (iii) paid
or agreed to pay to any person any compensation for soliciting another to purchase any other securities
of the Company or any of its Subsidiaries (other than the Placement Agent).


                                 9
                                     (m)        The Company is not, and has never been, an issuer identified in, or subject to, Rule 144(i).

                                     (n)      The Transaction Documents and each of the Company’s reports and filings filed with the
                                     Securities and Exchange Commission are true and correct in all material respects and do not contain
                                     any untrue statement of a material fact or omits to state a material fact necessary in order to make the
                                     statements contained herein or therein not misleading in light of the circumstances under which they
                                     were made. No statement, representation, warranty or covenant made by the Company in this
                                     Agreement or made in any certificate or document required by this Agreement was or will be, when
                                     made, inaccurate, untrue or incorrect. All statistical or market-related data included in the Offering
                                     Documents are based on or derived from sources that the Company believes to be reliable and accurate,
                                     and the Company has obtained the written consent to the use of such data from such sources to the
                                     extent required.

                  2.2        The representations and warranties of the Company will be true and correct as of the Closing Date in all
material respects and shall survive the Closing Date and the delivery of the Units.

     III.      INDEMNIFICATION

                    3.1       The Company agrees to indemnify, hold harmless, reimburse and defend the Subscriber, the Subscriber’s
officers, directors, agents, affiliates, control persons, and principal shareholders, against any claim, cost, expense, liability, obligation, loss
or damage (including reasonable legal fees) of any nature, incurred by or imposed upon the Subscriber or any such person which results,
arises out of or is based upon (i) any material misrepresentation by Company or breach of any warranty by Company of this Agreement; or
(ii) after any applicable notice and/or cure periods, any breach or default in performance by the Company of any covenant or undertaking to
be performed by the Company hereunder.

                  3.2        The Subscriber agrees to indemnify, hold harmless, reimburse and defend the Company and each of the
Company’s officers, directors, agents, affiliates, control persons against any claim, cost, expense, liability, obligation, loss or damage
(including reasonable legal fees) of any nature, incurred by or imposed upon the Company or any such person which results, arises out of or
is based upon (i) any material misrepresentation by the Subscriber or breach of any warranty by the Subscriber of this Agreement; or (ii)
after any applicable notice and/or cure periods, any breach or default in performance by the Subscriber of any covenant or undertaking to be
performed by the Subscriber hereunder, provided, however, that such indemnity shall in no event exceed the net proceeds received by the
Company from the Subscriber as a result of the sale of Units to the Subscriber.


                                                                      10
                   3.3         Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party
in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to such
indemnified party other than under this Article III and shall only relieve it from any liability which it may have to such indemnified party
under this Article III, except and only if and to the extent the indemnifying party is prejudiced by such omission. In case any such action
shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel reasonably
satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its election so to assume
and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Article III for any legal
expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of
investigation and of liaison with counsel so selected, provided, however, that, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those available to the indemnifying party, or if the interests of the
indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified parties, as a group,
shall have the right to select one separate counsel and to assume such legal defenses and otherwise to participate in the defense of such
action, with the reasonable expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by
the indemnifying party as incurred.

     IV.       TERMS OF SUBSCRIPTION

                   4.1       Subject to Section 4.2 hereof, the subscription period will begin as of the date of the PPM and will terminate at
11:59 PM Eastern Time, on the earlier of the date on which the Maximum Offering is sold or the Offering is terminated by the Company
(the “ Termination Date ”). The minimum subscription amount is $100,000, although the Company may, in its discretion, accept
subscriptions for less than $100,000.

                  4.2       The Subscriber shall effect a wire transfer in the full amount of the purchase price for the Units to the
Company’s escrow account pursuant to the wire instructions set forth in the Memorandum or shall deliver a check in payment of the
purchase price for the Units.

                   4.3        Pending the sale of the Units, all funds paid hereunder shall be deposited by the Company in escrow with the
Company’s escrow agent, which funds shall be held and distributed pursuant to an Escrow Agreement, the form of which is attached as an
exhibit to the PPM. If the Company shall not have obtained subscriptions (including this subscription) for the Minimum Offering on or
before the Termination Date (as such date may be extended by the Company and Placement Agent), then this subscription shall be void and
all funds paid hereunder by the Subscriber shall be promptly returned without interest to the Subscriber, to the same account from which the
funds were drawn. If subscriptions are received and accepted and payment tendered for the Minimum Offering on or prior to the
Termination Date, then all subscription proceeds (less fees and expenses) shall be paid over to the Company within ten (10) days thereafter
or such earlier date that is one (1) business day after the amount of good funds in escrow equals or exceeds the Minimum Offering. In such
event, sales of the Units may continue thereafter until the earlier of the date on which the Maximum Offering is sold and the Termination
Date, with subsequent releases of funds from time to time at the discretion of the Company.


                                                                    11
                  4.4      The Subscriber hereby authorizes and directs the Company and its escrow agent to deliver any certificates or
other written instruments representing the Units, and/or its underlying securities to be issued to such Subscriber pursuant to this
Subscription Agreement to the address indicated on the signature page hereof. The Company covenants to deliver the Common Stock and
Warrants within five (5) Business Days of closing on the Subscriber’s funds.

                   4.5       The Subscriber hereby authorizes and directs the Company and its escrow agent to return any funds, without
interest, for unaccepted subscriptions to the same account from which the funds were drawn.

     V.        MISCELLANEOUS

                 5.1        Any notice or other communication given hereunder shall be deemed sufficient if in writing and sent by
reputable overnight courier, facsimile (with receipt of confirmation) or registered or certified mail, return receipt requested, addressed to the
Company, at IceWEB, Inc., 22900 Shaw Road, Suite 111, Sterling, VA 20166, Attention: Chief Financial Officer, facsimile: (571)
287-2396, and to the Subscriber at the address or facsimile number indicated on the signature page hereof. Notices shall be deemed to have
been given on the date when mailed or sent by facsimile transmission or overnight courier, except notices of change of address, which shall
be deemed to have been given when received.

                5.2       This Subscription Agreement shall not be changed, modified or amended except by a writing signed by both (a)
the Company and (b) subscribers in the Offering holding a majority of the Units issued in the Offering.

                  5.3      This Subscription Agreement shall be binding upon and inure to the benefit of the parties hereto and to their
respective heirs, legal representatives, successors and assigns. This Subscription Agreement sets forth the entire agreement and
understanding between the parties as to the subject matter hereof and merges and supersedes all prior discussions, agreements and
understandings of any and every nature among them.

                  5.4        Notwithstanding the place where this Subscription Agreement may be executed by any of the parties hereto, the
parties expressly agree that all the terms and provisions hereof shall be construed in accordance with and governed by the laws of the State
of New York. The parties hereby agree that any dispute which may arise between them arising out of or in connection with this
Subscription Agreement shall be adjudicated only before a Federal court located in New York, New York and they hereby submit to the
exclusive jurisdiction of the federal courts located in New York, New York with respect to any action or legal proceeding commenced by
any party, and irrevocably waive any objection they now or hereafter may have respecting the venue of any such action or proceeding
brought in such a court or respecting the fact that such court is an inconvenient forum, relating to or arising out of this Subscription
Agreement or any acts or omissions relating to the sale of the securities hereunder, and consent to the service of process in any such action
or legal proceeding by means of registered or certified mail, return receipt requested, in care of the address set forth below or such other
address as the undersigned shall furnish in writing to the other.


                                                                     12
                   5.5      No delay on the part of any of the Company or Subscriber in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of the Company or Subscriber of any right, power or privilege hereunder
operate as a waiver of any other right, power or privilege hereunder, nor shall any single or partial exercise of any right, power or privilege
hereunder preclude any other or further exercise of any other right, power or privilege hereunder. The rights and remedies herein provided
are cumulative and are not exclusive of any rights or remedies which the parties hereto may otherwise have at law or in equity.

                 5.6      This Subscription Agreement may be executed in counterparts. Upon the execution and delivery of this
Subscription Agreement by the Subscriber, this Subscription Agreement shall become a binding obligation of the Subscriber with respect to
the purchase of Units as herein provided; subject, however, to the right hereby reserved by the Company to (i) enter into the same
agreements with other subscribers, (ii) add and/or delete other persons as subscribers and (iii) reduce the amount of or reject any
subscription.

                  5.7       The holding of any provision of this Subscription Agreement to be invalid or unenforceable by a court of
competent jurisdiction shall not affect any other provision of this Subscription Agreement, which shall remain in full force and effect.

                  5.8       It is agreed that a waiver by either party of a breach of any provision of this Subscription Agreement shall not
operate or be construed as a waiver of any subsequent breach by that same party.

                   5.9      The Company and Subscriber agree that each will hold in strict confidence all information and documents
received from the other in connection with the Offering. If the transactions herein contemplated shall not be consummated, each party will
continue to hold such information and documents in strict confidence and will return to such other party all such documents then in such
receiving party's possession without retaining copies thereof, provided, however, that each party's obligations hereunder to maintain such
confidentiality shall not apply to any information or documents that are in the public domain at the time furnished by the other or that
become in the public domain thereafter through any means other than as a result of any act of the receiving party or of its agents, officers,
directors or shareholders, which constitutes a breach of this Agreement, or that are required by applicable law to be disclosed.

                   5.10      The parties agree to execute and deliver all such further documents, agreements and instruments and take such
other and further actions as may be necessary or appropriate to carry out the purposes and intent of this Subscription Agreement.


                                                                    13
[Signature Pages Follow]


          14
                IN WITNESS WHEREOF , the parties have executed this Subscription Agreement as of the day and year first written
above.

__________________________                  X $0.12 for each Unit                = $_____________________.
Number of Units subscribed for                                                   Aggregate Purchase Price

Payment for Units shall be by (Please Check All that Apply) :

1.             Wire Transfer

2.             Check

Manner in which Title is to be held (Please Check One ):

 1.            Individual                                   7.         Trust/Estate/Pension or Profit Sharing Plan

2.             Joint Tenants with Right of Survivorship     8.         As a Custodian for
                                                                         ________________________________
                                                                         Under the Uniform Gift to Minors Act of the State of
                                                                         ________________________________
3.             Community Property                           9.         Married with Separate Property
4.             Tenants in Common                            10.        Keogh
5.             Corporation/Partnership/ Limited Liability   11.        Tenants by the Entirety
                Company
6.             IRA                                          12.        Foundation described in Section 501(c)(3) of the Internal
                                                                         Revenue Code of 1986, as amended.

      IF MORE THAN ONE SUBSCRIBER, EACH SUBSCRIBER MUST SIGN:
         INDIVIDUAL SUBSCRIBERS MUST COMPLETE PAGE 10
         SUBSCRIBERS WHICH ARE ENTITIES MUST COMPLETE PAGE 11


                                                                    15
                                             EXECUTION BY NATURAL PERSONS


Exact Name in Which Title is to be Held

Name (Please Print)                                                  Name of Additional Subscriber


Residence: Number and Street                                         Address of Additional Subscriber


City, State and Zip Code                                             City, State and Zip Code


Social Security Number                                               Social Security Number


Telephone Number                                                     Telephone Number


Fax Number (if available)                                            Fax Number (if available)


E-Mail (if available)                                                E-Mail (if available)

(Signature)                                                          (Signature of Additional Subscriber)

*If Subscriber is a Registered Representative with a FINRA
member firm, have the following acknowledgement signed by the
appropriate party:

The undersigned FINRA member firm acknowledges receipt of the
notice required by Rule 3050 of the FINRA Conduct Rules

                                                                     ACCEPTED this ____ day of __________ 2012, on behalf of
                                                                     IceWEB, Inc.
Name of FINRA Firm

By:                                                                  By:
 Name:                                                                Name:
 Title:                                                               Title:


                                                                16
                                          EXECUTION BY SUBSCRIBER WHICH IS AN ENTITY

(Corporation, Partnership, Trust, Etc.)


Name of Entity (Please Print)
Date of Incorporation or Organization:

State of Principal Office:

Federal Taxpayer Identification Number:


Office Address

City, State and Zip Code

Telephone Number

Fax Number (if available)

E-Mail (if available)


[seal]                                                   By:
                                                                     Name:
Attest:                                                              Title:
(If Entity is a Corporation)

*If Subscriber is a Registered Representative with a FINRA
member firm, have the following acknowledgement signed by the
appropriate party:

The undersigned FINRA member firm acknowledges receipt of the
notice required by Rule 3050 of the FINRA
Conduct Rules

                                                                 ACCEPTED this ____ day of __________ 2012, on behalf of
                                                                 IceWEB, Inc.
Name of FINRA Firm


By:                                                              By:
 Name:                                                            Name:
 Title:                                                           Title:


                                                                17
Exhibit 10.28

                                                 REGISTRATION RIGHTS AGREEMENT

         This REGISTRATION RIGHTS AGREEMENT (this “ Agreement ”), dated as of ___________, 2012, is by and among IceWEB,
Inc., a Delaware corporation (the “ Company ”), and each of the undersigned buyers (each, a “ Buyer ,” and collectively, the “ Buyers ”).

                                                                   RECITALS

         In connection with the offer and sale of the Units (the “ Offering ”) pursuant to the terms of that certain Confidential Private
Placement Memorandum dated June _______, 2012 (the “ Memorandum ”), and to induce the Buyers to purchase the Units pursuant to the
terms of the Memorandum, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the
rules and regulations thereunder, or any similar successor statute (collectively, the “ 1933 Act ”), and applicable state securities laws.

                                                                 AGREEMENT

        NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and each of the Buyers hereby agree as follows:

Definitions .

         Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Memorandum. As
used in this Agreement, the following terms shall have the following meanings:

         “ Business Day ” means any day other than Saturday, Sunday or any other day on which commercial banks in New York, New York
are authorized or required by law to remain closed.

         “ Effective Date ” means the date that the applicable Registration Statement has been declared effective by the SEC.

          “ Effectiveness Deadline ” means (i) with respect to the initial Registration Statement required to be filed pursuant to Section 2(a), the
earlier of the (A) ninety (90) calendar day after the final closing date of the Offering (the “ Closing Date ”) (or one hundred and twenty (120)
calendar day after the Closing Date in the event that such Registration Statement is subject to review by the SEC) and (B) the third Business
Day after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC that such Registration Statement will not be
reviewed or will not be subject to further review, and (ii) with respect to any additional Registration Statements that may be required to be filed
by the Company pursuant to this Agreement, the earlier of the (A) ninety (90) calendar day following the date on which the Company was
required to file such additional Registration Statement and (B) the third Business Day after the date the Company is notified (orally or in
writing, whichever is earlier) by the SEC that such Registration Statement will not be reviewed or will not be subject to further review.


                                                                         1
         “ Filing Deadline ” means (i) with respect to the initial Registration Statement required to be filed pursuant to Section 2(a), thirty (30)
calendar day after the Closing Date and (ii) with respect to any additional Registration Statements that may be required to be filed by the
Company pursuant to this Agreement, the date on which the Company was required to file such additional Registration Statement pursuant to
the terms of this Agreement.

         “ Person ” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated
organization or a government or any department or agency thereof.

         “ register ,” “ registered ,” and “ registration ” refer to a registration effected by preparing and filing one or more Registration
Statements in compliance with the 1933 Act and pursuant to Rule 415 and the declaration of effectiveness of such Registration Statement(s) by
the SEC.

         “ Registrable Securities ” means (i) the shares of the Company’s common stock (the “ Common Stock ”) included in the Units, (ii)
the shares of the Common Stock issuable upon the exercise of the Warrants pursuant to their terms (the “ Warrant Shares ”), (iii) the shares of
the Common Stock issuable upon the exercise of the Placement Agent Warrants pursuant to their terms (the “ PA Warrant Shares ”), (iv) any
additional shares issuable in connection with any anti-dilution provisions associated with such Warrants or Placement Agent Warrants, and (v)
any securities issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the
foregoing.

        “ Registration Statement ” means a registration statement or registration statements of the Company filed under the 1933 Act
covering Registrable Securities.

         “ Required Holders ” means the holders of at least 80% of the Registrable Securities.

         “ Required Registration Amount ” means the sum of (i) the maximum number of shares of Common Stock included in the Units
sold in the Offering and (ii) 133% the maximum number of Warrant Shares and PA Warrant Shares issued and issuable pursuant to the
Warrants and Placement Agent Warrants.

         “ Rule 144 ” means Rule 144 promulgated by the SEC under the 1933 Act, as such rule may be amended from time to time, or any
other similar or successor rule or regulation of the SEC that may at any time permit the Buyers to sell securities of the Company to the public
without registration.

         “ Rule 415 ” means Rule 415 promulgated by the SEC under the 1933 Act, as such rule may be amended from time to time, or any
other similar or successor rule or regulation of the SEC providing for offering securities on a continuous or delayed basis.

         “ SEC ” means the United States Securities and Exchange Commission or any successor thereto.


                                                                         2
Registration .

          (a) The Company shall prepare and, as soon as practicable, but in no event later than the Filing Deadline, file with the SEC an initial
Registration Statement on Form S-1 covering the resale of all of the Registrable Securities; provided that such initial Registration Statement
shall register for resale at least the number of shares of Common Stock equal to the Required Registration Amount as of the date such
Registration Statement is initially filed with the SEC. Such initial Registration Statement, and each other Registration Statement required to be
filed pursuant to the terms of this Agreement, shall contain (except if otherwise directed by the Required Holders) the “ Selling Stockholders ”
and “ Plan of Distribution ” sections in substantially the form attached hereto as Exhibit A . The Company shall use its best efforts to have
such initial Registration Statement, and each other Registration Statement required to be filed pursuant to the terms of this Agreement, declared
effective by the SEC as soon as practicable, but in no event later than the applicable Effectiveness Deadline for such Registration Statement.

          If (i) a Registration Statement covering the resale of all of the Registrable Securities required to be covered thereby (disregarding any
reduction pursuant to Section 2(c)) and required to be filed by the Company pursuant to this Agreement is (A) not filed with the SEC on or
before the Filing Deadline for such Registration Statement (a “ Filing Failure ”) (it being understood that if the Company files a Registration
Statement without affording each Buyer the opportunity to review and comment on the same as required by Section 3(c) hereof, the Company
shall be deemed to not have satisfied this clause (i)(A) and such event shall be deemed to be a Filing Failure) or (B) not declared effective by
the SEC on or before the Effectiveness Deadline for such Registration Statement (an “ Effectiveness Failure ”) (it being understood that if on
the Business Day immediately following the Effective Date for such Registration Statement the Company shall not have filed a “final”
prospectus for such Registration Statement with the SEC under Rule 424(b) in accordance with Section 3(b) (whether or not such a prospectus
is technically required by such rule), the Company shall be deemed to not have satisfied this clause (i)(B) and such event shall be deemed to be
an Effectiveness Failure), (ii) other than during an Allowable Grace Period (as defined below), on any day after the Effective Date of a
Registration Statement, sales of all of the Registrable Securities required to be included on such Registration Statement (disregarding any
reduction pursuant to Section 2(c) ) cannot be made pursuant to such Registration Statement or otherwise (including, without limitation,
because of a failure to keep such Registration Statement effective, a failure to disclose such information as is necessary for sales to be made
pursuant to such Registration Statement, a suspension or removal from quotation of the shares of Common Stock from the OTC Bulletin Board
or such other primary market or exchange on which the Common Stock is then quoted or listed, or a failure to register a sufficient number of
shares of Common Stock or by reason of a stop order) or the prospectus contained therein is not available for use for any reason (a “
Maintenance Failure ”), or (iii) at any time when a Registration Statement is not effective for any reason or the prospectus contained therein is
not available for use for any reason, the Company fails to file with the SEC any required reports under Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (“ 1934 Act ”) such that it is not in compliance with Rule 144(c)(1) (or Rule 144(i)(2), if applicable) (a “
Current Public Information Failure ”) as a result of which any of the Buyers are unable to sell Registrable Securities without restriction
under Rule 144 (including, without limitation, volume restrictions), then, as partial relief for the damages to any holder by reason of any such
delay in, or reduction of, its ability to sell the shares of Common Stock (which remedy shall not be exclusive of any other remedies available at
law or in equity), the Company shall pay to each holder of Registrable Securities relating to such Registration Statement an amount in cash
equal to one percent (1%) of such Buyer’s purchase price of the Units (less any sales previously made thereunder) acquired pursuant to the
Memorandum (1) on the date of such Filing Failure, Effectiveness Failure, Maintenance Failure or Current Public Information Failure, as
applicable, and (2) on every thirty (30) day anniversary of (I) a Filing Failure until such Filing Failure is cured; (II) an Effectiveness Failure
until such Effectiveness Failure is cured; (III) a Maintenance Failure until such Maintenance Failure is cured; and (IV) a Current Public
Information Failure until the earlier of (i) the date such Current Public Information Failure is cured and (ii) such time that such public
information is no longer required pursuant to Rule 144 (in each case, pro rated for periods totaling less than thirty (30) days). The payments to
which a holder of Registrable Securities shall be entitled pursuant to this Section 2 (b) are referred to herein as “ Registration Delay Payments
.” Following the initial Registration Delay Payment for any particular event or failure (which shall be paid on the date of such event or failure,
as set forth above), without limiting the foregoing, if an event or failure giving rise to the Registration Delay Payments is cured prior to any
thirty (30) day anniversary of such event or failure, then such Registration Delay Payment shall be made on the third (3 rd ) Business Day after
such cure. In the event the Company fails to make Registration Delay Payments in a timely manner in accordance with the foregoing, such
Registration Delay Payments shall bear interest at the rate of one and one-half percent (1.5%) per month (prorated for partial months) until paid
in full. Notwithstanding the foregoing, no Registration Delay Payments shall be owed to a Buyer (other than with respect to a Maintenance
Failure resulting from a suspension of listing or quotation of the shares of Common Stock on the principal market with respect to any period
during which all of such Buyer’s Registrable Securities may be sold by such Buyer without restriction under Rule 144 (including, without
limitation, volume restrictions) and without the need for current public information required by Rule 144(c)(1) (or Rule 144(i)(2), if
applicable).


                                                                        3
         Notwithstanding anything to the contrary contained in this Agreement, but subject to the payment of the Registration Delay Payments
pursuant to Section 2(b), in the event the staff of the SEC (the “ Staff ”) or the SEC seeks to characterize any offering pursuant to a
Registration Statement filed pursuant to this Agreement as constituting an offering of securities by, or on behalf of, the Company, or in any
other manner, such that the Staff or the SEC do not permit such Registration Statement to become effective and used for resales in a manner
that does not constitute such an offering and that permits the continuous resale at the market by the Buyers participating therein (or as
otherwise may be acceptable to each Buyer) without being named therein as an “underwriter,” then the Company shall reduce the number of
shares to be included in such Registration Statement by all Buyers until such time as the Staff and the SEC shall so permit such Registration
Statement to become effective as aforesaid. In making such reduction, the Company shall reduce the number of shares to be included by all
Buyers on a pro rata basis (based upon the number of Registrable Securities otherwise required to be included for each Buyers) unless the
inclusion of shares by a particular Buyers or a particular set of Buyers are resulting in the Staff or the SEC’s “by or on behalf of the Company”
offering position, in which event the shares held by such Buyer or set of Buyers shall be the only shares subject to reduction (and if by a set of
Buyer on a pro rata basis by such Buyers or on such other basis as would result in the exclusion of the least number of shares by all such
Buyers). In addition, in the event that the Staff or the SEC requires any Buyer seeking to sell securities under a Registration Statement filed
pursuant to this Agreement to be specifically identified as an “underwriter” in order to permit such Registration Statement to become effective,
and such Buyer does not consent to being so named as an underwriter in such Registration Statement, then, in each such case, the Company
shall reduce the total number of Registrable Securities to be registered on behalf of such Buyer, until such time as the Staff or the SEC does not
require such identification or until such Buyer accepts such identification and the manner thereof. In the event of any reduction in Registrable
Securities pursuant to this paragraph, an affected Buyer shall have the right to require, upon delivery of a written request to the Company
signed by such Buyer, the Company to file a registration statement within thirty (30) calendar days of such request (subject to any restrictions
imposed by Rule 415 or required by the Staff or the SEC) for resale by such Buyer in a manner reasonably acceptable to such Buyer, and the
Company shall following such request cause to be and keep effective such registration statement in the same manner as otherwise contemplated
in this Agreement for registration statements hereunder, in each case, until such time as: (i) all Registrable Securities held by such Buyer have
been registered and sold pursuant to an effective Registration Statement in a manner acceptable to such Buyer or (ii) all Registrable Securities
may be resold by such Buyer without restriction (including, without limitation, volume limitations) pursuant to Rule 144 (taking account of any
Staff position with respect to “affiliate” status) and without the need for current public information required by Rule 144(c)(1) (or Rule
144(i)(2), if applicable) or (iii) such Buyer agrees to be named as an underwriter in any such Registration Statement in a manner acceptable to
such Buyer as to all Registrable Securities held by such Buyer and that have not theretofore been included in a Registration Statement under
this Agreement (it being understood that the special demand right under this sentence may be exercised by an Buyer multiple times and with
respect to limited amounts of Registrable Securities in order to permit the resale thereof by such Buyer as contemplated above).


                                                                        4
         Subject to Section 5 hereof, Meyers Associates L.P. (“ Meyers ”) shall have the right to select one (1) legal counsel to review and
oversee, solely on its behalf, any registration pursuant to this Section 2 (“ Legal Counsel ”), which shall be Sichenzia Ross Friedman Ference
LLP or such other counsel as thereafter designated by Meyers.

         The initial number of Registrable Securities included in any Registration Statement and any increase in the number of Registrable
Securities included therein shall be allocated pro rata among the Buyers based on the number of Registrable Securities held by each Buyer at
the time such Registration Statement covering such initial number of Registrable Securities or increase thereof is declared effective by the SEC.
Any shares of Common Stock included in a Registration Statement and which remain allocated to any Person which ceases to hold any
Registrable Securities covered by such Registration Statement shall be allocated to the remaining Buyers, pro rata based on the number of
Registrable Securities then held by such Buyers which are covered by such Registration Statement.

Related Obligations .

         The Company shall use its best efforts to effect the registration of the Registrable Securities in accordance with the intended method
of disposition thereof, and, pursuant thereto, the Company shall have the following obligations:


                                                                       5
          (b) The Company shall promptly prepare and file with the SEC a Registration Statement with respect to all the Registrable Securities
(but in no event later than the applicable Filing Deadline) and use its best efforts to cause such Registration Statement to become effective as
soon as practicable after such filing (but in no event later than the Effectiveness Deadline). Subject to Allowable Grace Periods, the Company
shall keep each Registration Statement effective (and the prospectus contained therein available for use) pursuant to Rule 415 for resales by the
Buyers on a delayed or continuous basis at then-prevailing market prices (and not fixed prices) at all times until the earlier of (i) the date as of
which all of the Buyers may sell all of the Registrable Securities required to be covered by such Registration Statement (disregarding any
reduction pursuant to Section 2(c)) without restriction pursuant to Rule 144 (including, without limitation, volume restrictions) and without the
need for current public information required by Rule 144(c)(1) (or Rule 144(i)(2), if applicable) or (ii) the date on which the Buyers shall have
sold all of the Registrable Securities covered by such Registration Statement (the “ Registration Period ”). Notwithstanding anything to the
contrary contained in this Agreement, the Company shall ensure that, when filed and at all times while effective, each Registration Statement
(including, without limitation, all amendments and supplements thereto) and the prospectus (including, without limitation, all amendments and
supplements thereto) used in connection with such Registration Statement (1) shall not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein, or necessary to make the statements therein (in the case of prospectuses, in the light of the
circumstances in which they were made) not misleading and (2) will disclose (whether directly or through incorporation by reference to other
SEC filings to the extent permitted) all material information regarding the Company and its securities. The Company shall submit to the SEC,
within one (1) Business Day after the later of the date that the Company learns that no review of a particular Registration Statement will be
made by the Staff or that the Staff has no further comments on a particular Registration Statement (as the case may be) , a request for
acceleration of effectiveness of such Registration Statement to a time and date not later than forty-eight (48) hours after the submission of such
request.

         Subject to Section 3(i) of this Agreement, the Company shall prepare and file with the SEC such amendments (including , without
limitation, post-effective amendments) and supplements to each Registration Statement and the prospectus used in connection with each such
Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may be necessary to keep each
such Registration Statement effective at all times during the Registration Period for such Registration Statement, and, during such period,
comply with the provisions of the 1933 Act with respect to the disposition of all Registrable Securities of the Company required to be covered
by such Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof as set forth in such Registration Statement; provided, however, by 8:30 a.m. (New York
time) on the Business Day immediately following each Effective Date, the Company shall file with the SEC in accordance with Rule 424(b)
under the 1933 Act the final prospectus to be used in connection with sales pursuant to the applicable Registration Statement (whether or not
such a prospectus is technically required by such rule). In the case of amendments and supplements to any Registration Statement which are
required to be filed pursuant to this Agreement (including, without limitation, pursuant to this Section 3 (b)) by reason of the Company filing a
report on Form 10-Q or Form 10-K or any analogous report under the 1934 Act, the Company shall have incorporated such report by reference
into such Registration Statement, if applicable, or shall file such amendments or supplements with the SEC on the same day on which the 1934
Act report is filed which created the requirement for the Company to amend or supplement such Registration Statement.


                                                                         6
          The Company shall (A) permit Legal Counsel and legal counsel for each other Buyer to review and comment upon (i) each
Registration Statement at least three (3) Business Days prior to its filing with the SEC and (ii) all amendments and supplements to each
Registration Statement (including, without limitation, the prospectus contained therein) (except for Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K, and any similar or successor reports) within a reasonable number of days prior to their
filing with the SEC, and (B) not file any Registration Statement or amendment or supplement thereto in a form to which Legal Counsel or any
legal counsel for any other Buyer reasonably objects. The Company shall not submit a request for acceleration of the effectiveness of a
Registration Statement or any amendment or supplement thereto or to any prospectus contained therein without the prior consent of Legal
Counsel, which consent shall not be unreasonably withheld. The Company shall promptly furnish to Legal Counsel and, upon each other
Buyer’s written request, legal counsel for each such other Buyer, without charge, (i) copies of any correspondence from the SEC or the Staff to
the Company or its representatives relating to each Registration Statement, provided that such correspondence shall not contain any material,
non-public information regarding the Company, (ii) after the same is prepared and filed with the SEC, one (1) copy of each Registration
Statement and any amendment(s) and supplement(s) thereto, including, without limitation, financial statements and schedules, all documents
incorporated therein by reference, if requested by a Buyer, and all exhibits and (iii) upon the effectiveness of each Registration Statement, one
(1) copy of the prospectus included in such Registration Statement and all amendments and supplements thereto. The Company shall
reasonably cooperate with Legal Counsel and legal counsel for each other Buyer in performing the Company’s obligations pursuant to this
Section 3.

          Upon request, the Company shall promptly furnish to each Buyer, upon request, without charge, (i) copies of any correspondence
from the SEC or the Staff to the Company or its representatives relating to each Registration Statement, provided that such correspondence
shall not contain any material, non-public information regarding the Company or any of its subsidiaries, and (ii) after the same is prepared and
filed with the SEC, one (1) copy of each Registration Statement and any amendment(s) and supplement(s) thereto, including, without
limitation, financial statements and schedules, all documents incorporated therein by reference, if requested by a Buyer, and all exhibits (unless
such Registration Statement is available on EDGAR).

         The Company shall promptly furnish to each Buyer whose Registrable Securities are included in any Registration Statement, without
charge, (i) upon the effectiveness of each Registration Statement, one (1) copy of the prospectus included in such Registration Statement and
all amendments and supplements thereto (unless such Registration Statement is available on EDGAR) and (ii) such other documents, including,
without limitation, a copy of the final prospectus, as such Buyer may reasonably request from time to time in order to facilitate the disposition
of the Registrable Securities owned by such Buyer (unless such final prospectus is available on EDGAR).


                                                                        7
          The Company shall use its reasonable best efforts to (i) register and qualify, unless an exemption from registration and qualification
applies, the resale by the Buyers of the Registrable Securities covered by a Registration Statement under such other securities or “blue sky”
laws of all applicable jurisdictions in the United States, (ii) prepare and file in those jurisdictions, such amendments (including, without
limitation, post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, the Company shall not be required in connection therewith or as a
condition thereto to (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(e),
(y) subject itself to general taxation in any such jurisdiction, or (z) file a general consent to service of process in any such jurisdiction. The
Company shall promptly notify each Buyer who holds Registrable Securities of the receipt by the Company of any notification with respect to
the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or “blue sky” laws of any
jurisdiction in the United States or its receipt of actual notice of the initiation or threatening of any proceeding for such purpose.

          The Company shall notify Legal Counsel and each Buyer in writing of the happening of any event, as promptly as practicable after
becoming aware of such event, as a result of which the prospectus included in a Registration Statement, as then in effect, includes an untrue
statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading (provided that in no event shall such notice contain any material,
non-public information regarding the Company or any of its subsidiaries), and, subject to Section 3(i), promptly prepare a supplement or
amendment to such Registration Statement and such prospectus contained therein to correct such untrue statement or omission and deliver one
(1) copy of such supplement or amendment to Legal Counsel and each Buyer (unless such supplements or amendments are available on
EDGAR). The Company shall also promptly notify Legal Counsel and each Buyer in writing (i) when a prospectus or any prospectus
supplement or post-effective amendment has been filed, when a Registration Statement or any post-effective amendment has become effective
(notification of such effectiveness shall be delivered to Legal Counsel and each Buyer by facsimile or e-mail on the same day of such
effectiveness and by overnight mail), and when the Company receives written notice from the SEC that a Registration Statement or any
post-effective amendment will be reviewed by the SEC, (ii) of any request by the SEC for amendments or supplements to an effective
Registration Statement or related prospectus or related information, (iii) of the Company’s reasonable determination that a post-effective
amendment to a Registration Statement would be appropriate; and (iv) of the receipt of any request by the SEC or any other federal or state
governmental authority for any additional information relating to the Registration Statement or any amendment or supplement thereto or any
related prospectus. The Company shall respond as promptly as practicable to any comments received from the SEC with respect to each
Registration Statement or any amendment thereto (it being understood and agreed that the Company’s response to any such comments shall be
delivered to the SEC no later than 10 Business Days after the receipt thereof).


                                                                          8
         The Company shall (i) use its reasonable best efforts to prevent the issuance of any stop order or other suspension of effectiveness of
each Registration Statement or the use of any prospectus contained therein, or the suspension of the qualification, or the loss of an exemption
from qualification, of any of the Registrable Securities for sale in any jurisdiction and, if such an order or suspension is issued, to obtain the
withdrawal of such order or suspension at the earliest possible moment and (ii) notify Legal Counsel and each Buyer who holds Registrable
Securities of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding for
such purpose.

          The Company shall hold in confidence and not make any disclosure of information concerning a Buyer provided to the Company
unless (i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information is
necessary to avoid or correct a misstatement or omission in any Registration Statement or is otherwise required to be disclosed in such
Registration Statement pursuant to the 1933 Act, (iii) the release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent jurisdiction, or (iv) such information has been made generally available
to the public other than by disclosure in violation of this Agreement. The Company agrees that it shall, upon learning that disclosure of such
information concerning a Buyer is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt
written notice to such Buyer and allow such Buyer, at such Buyer’s expense, to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, such information.

         Notwithstanding anything to the contrary herein (but subject to the last sentence of this Section 3(i)), at any time after the Effective
Date of a particular Registration Statement, the Company may delay the disclosure of material, non-public information concerning the
Company or any of its subsidiaries the disclosure of which at the time is not, in the good faith opinion of the board of directors of the
Company, in the best interest of the Company and, in the opinion of counsel to the Company, otherwise required (a “ Grace Period ”),
provided that the Company shall promptly notify the Buyers in writing of the (i) existence of material, non-public information giving rise to a
Grace Period (provided that in each such notice the Company shall not disclose the content of such material, non-public information to any of
the Buyers) and the date on which such Grace Period will begin and (ii) date on which such Grace Period ends, provided further that (I) no
Grace Period shall exceed ten (10) consecutive days and during any three hundred sixty five (365) day period all such Grace Periods shall not
exceed an aggregate of thirty (30) days, (II) the first day of any Grace Period must be at least five (5) Trading Days after the last day of any
prior Grace Period and (III) no Grace Period may exist during the thirty (30) Trading Day period immediately following the Effective Date of
such Registration Statement (provided that such thirty (30) Trading Day period shall be extended by the number of Trading Days during such
period and any extension thereof contemplated by this proviso during which such Registration Statement is not effective or the prospectus
contained therein is not available for use) (each, an “ Allowable Grace Period ”). For purposes of determining the length of a Grace Period
above, such Grace Period shall begin on and include the date the Buyers receive the notice referred to in clause (i) above and shall end on and
include the later of the date the Buyers receive the notice referred to in clause (ii) above and the date referred to in such notice. The provisions
of Section 3(g) hereof shall not be applicable during the period of any Allowable Grace Period. Notwithstanding anything to the contrary
contained in this Section 3 (j), the Company shall cause its transfer agent to deliver unlegended shares of Common Stock to a transferee of a
Buyer in connection with any sale of Registrable Securities with respect to which such Buyer has entered into a contract for sale, and delivered
a copy of the prospectus included as part of the particular Registration Statement to the extent applicable, prior to such Buyer’s receipt of the
notice of a Grace Period and for which the Buyer has not yet settled.


                                                                         9
Obligations of the Buyers .

         At least five (5) Business Days prior to the first anticipated filing date of each Registration Statement, the Company shall notify each
Buyer in writing of the information the Company requires from each such Buyer with respect to such Registration Statement. It shall be a
condition precedent to the obligations of the Company to complete the registration pursuant to this Agreement with respect to the Registrable
Securities of a particular Buyer that such Buyer shall furnish to the Company such information regarding itself, the Registrable Securities held
by it and the intended method of disposition of the Registrable Securities held by it, as shall be reasonably required to effect and maintain the
effectiveness of the registration of such Registrable Securities and shall execute such documents in connection with such registration as the
Company may reasonably request.

        Each Buyer, by such Buyer’s acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested
by the Company in connection with the preparation and filing of each Registration Statement hereunder, unless such Buyer has notified the
Company in writing of such Buyer’s election to exclude all of such Buyer’s Registrable Securities from such Registration Statement.

          Each Buyer agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section
3(g) or the first sentence of 3(f) , such Buyer will immediately discontinue disposition of Registrable Securities pursuant to any Registration
Statement(s) covering such Registrable Securities until such Buyer’s receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(g) or the first sentence of Section 3(f) or receipt of notice that no supplement or amendment is required.
Notwithstanding anything to the contrary in this Section 4 (c), the Company shall cause its transfer agent to deliver unlegended shares of
Common Stock to a transferee of a Buyer in connection with any sale of Registrable Securities with respect to which such Buyer has entered
into a contract for sale prior to the Buyer’s receipt of a notice from the Company of the happening of any event of the kind described in Section
3(g) or the first sentence of Section 3(f) and for which such Buyer has not yet settled.

        Each Buyer covenants and agrees that it will comply with the prospectus delivery requirements of the 1933 Act as applicable to it in
connection with sales of Registrable Securities pursuant to a Registration Statement.


                                                                       10
Expenses of Registration .

                    All reasonable expenses, other than underwriting discounts and commissions, incurred in connection with registrations,
filings or qualifications pursuant to Sections 2
and 3, including, without limitation, all registration, listing and qualifications fees, printers and accounting fees, blue sky fees and fees and
disbursements of counsel for the Company shall be paid by the Company. The Company shall also reimburse Meyers for the fees and
disbursements of Legal Counsel in connection with registration, filing or qualification pursuant to Sections 2 and 3 of this Agreement which
amount shall be limited to $5,000.

Indemnification .

          To the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend each Buyer and each
of its directors, officers, shareholders, members, partners, employees, agents, advisors, representatives (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding the lack of such title or any other title) and each Person, if any, who
controls such Buyer within the meaning of the 1933 Act or the 1934 Act and each of the directors, officers, shareholders, members, partners,
employees, agents, advisors, representatives (and any other Persons with a functionally equivalent role of a Person holding such titles
notwithstanding the lack of such title or any other title) of such controlling Persons (each, an “ Indemnified Person ”), against any losses,
obligations, claims, damages, liabilities, contingencies, judgments, fines, penalties, charges, costs (including, without limitation, court costs,
reasonable attorneys’ fees and costs of defense and investigation), amounts paid in settlement or expenses, joint or several, (collectively, “
Claims ”) incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the
foregoing by or before any court or governmental, administrative or other regulatory agency, body or the SEC, whether pending or threatened,
whether or not an indemnified party is or may be a party thereto (“ Indemnified Damages ”), to which any of them may become subject
insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any
untrue statement or alleged untrue statement of a material fact in a Registration Statement or any post-effective amendment thereto or in any
filing made in connection with the qualification of the offering under the securities or other “blue sky” laws of any jurisdiction in which
Registrable Securities are offered (“ Blue Sky Filing ”), or the omission or alleged omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus if used prior to the effective date of such Registration Statement, or contained in the final prospectus (as amended
or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state
therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were
made, not misleading or (iii) any violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any other law, including,
without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities
pursuant to a Registration Statement (the matters in the foregoing clauses (i) through (iii) being, collectively, “ Violations ”). Subject to Section
6(c), the Company shall reimburse the Indemnified Persons, promptly as such expenses are incurred and are due and payable, for any legal fees
or other reasonable out-of-pocket expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement contained in this Section 6(a): (i) shall not apply to a Claim by an
Indemnified Person arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in
writing to the Company by such Indemnified Person for such Indemnified Person expressly for use in connection with the preparation of such
Registration Statement or any such amendment thereof or supplement thereto, or any preliminary or final prospectus, and (ii) shall not be
available to a particular Buyer to the extent such Claim is based on a failure of such Buyer to deliver or to cause to be delivered the prospectus
made available by the Company (to the extent applicable), including, without limitation, a corrected prospectus, if such prospectus or corrected
prospectus was timely made available by the Company pursuant to Section 3(d) and then only if, and to the extent that, following the receipt of
the corrected prospectus no grounds for such Claim would have existed; and (iii) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld or delayed.
Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall
survive the transfer of any of the Registrable Securities by any of the Buyers pursuant to Section 9.


                                                                         11
          In connection with any Registration Statement in which a Buyer is participating, such Buyer agrees to severally and not jointly
indemnify, hold harmless and defend, to the same extent and in the same manner as is set forth in Section 6(a), the Company, each of its
directors, each of its officers who signs the Registration Statement and each Person, if any, who controls the Company within the meaning of
the 1933 Act or the 1934 Act (each, an “ Indemnified Party ”), against any Claim or Indemnified Damages to which any of them may become
subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or are based upon any
Violation, in each case, to the extent, and only to the extent, that such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Buyer expressly for use in connection with such Registration Statement or any preliminary or
final prospectus; and, subject to Section 6(c) and the below provisos in this Section 6(b), such Buyer will reimburse an Indemnified Party any
legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such Claim; provided,
however, the indemnity agreement contained in this Section 6(b) and the agreement with respect to contribution contained in Section 7 shall not
apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of such Buyer, which consent
shall not be unreasonably withheld or delayed, provided further that such Buyer shall be liable under this Section 6(b) for only that amount of a
Claim or Indemnified Damages as does not exceed the net proceeds to such Buyer as a result of the applicable sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on
behalf of such Indemnified Party and shall survive the transfer of any of the Registrable Securities by any of the Buyers pursuant to Section 9.


                                                                       12
          Promptly after receipt by an Indemnified Person or Indemnified Party (as the case may be) under this Section 6 of notice of the
commencement of any action or proceeding (including, without limitation, any governmental action or proceeding) involving a Claim, such
Indemnified Person or Indemnified Party (as the case may be) shall, if a Claim in respect thereof is to be made against any indemnifying party
under this Section 6, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the
right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to
assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the
Indemnified Party (as the case may be); provided, however, an Indemnified Person or Indemnified Party (as the case may be) shall have the
right to retain its own counsel with the fees and expenses of such counsel to be paid by the indemnifying party if: (i) the indemnifying party has
agreed in writing to pay such fees and expenses; (ii) the indemnifying party shall have failed promptly to assume the defense of such Claim and
to employ counsel reasonably satisfactory to such Indemnified Person or Indemnified Party (as the case may be) in any such Claim; or (iii) the
named parties to any such Claim (including, without limitation, any impleaded parties) include both such Indemnified Person or Indemnified
Party (as the case may be) and the indemnifying party, and such Indemnified Person or such Indemnified Party (as the case may be) shall have
been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Person or such
Indemnified Party and the indemnifying party (in which case, if such Indemnified Person or such Indemnified Party (as the case may be)
notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, then the
indemnifying party shall not have the right to assume the defense thereof and such counsel shall be at the expense of the indemnifying party,
provided further that in the case of clause (iii) above the indemnifying party shall not be responsible for the reasonable fees and expenses of
more than one (1) separate legal counsel for such Indemnified Person or Indemnified Party (as the case may be). The Indemnified Party or
Indemnified Person (as the case may be) shall reasonably cooperate with the indemnifying party in connection with any negotiation or defense
of any such action or Claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the
Indemnified Party or Indemnified Person (as the case may be) which relates to such action or Claim. The indemnifying party shall keep the
Indemnified Party or Indemnified Person (as the case may be) reasonably apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without
its prior written consent; provided, however, the indemnifying party shall not unreasonably withhold, delay or condition its consent. No
indemnifying party shall, without the prior written consent of the Indemnified Party or Indemnified Person (as the case may be), consent to
entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party or Indemnified Person (as the case may be) of a release from all liability in respect to such
Claim or litigation, and such settlement shall not include any admission as to fault on the part of the Indemnified Party. Following
indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or Indemnified
Person (as the case may be) with respect to all third parties, firms or corporations relating to the matter for which indemnification has been
made. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall
not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party (as the case may be) under this Section 6,
except to the extent that the indemnifying party is materially and adversely prejudiced in its ability to defend such action.


                                                                       13
         No Person involved in the sale of Registrable Securities who is guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) in connection with such sale shall be entitled to indemnification from any Person involved in such sale of Registrable
Securities who is not guilty of fraudulent misrepresentation.

         The indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or Indemnified Damages are incurred.

         The indemnity and contribution agreements contained herein shall be in addition to (i) any cause of action or similar right of the
Indemnified Party or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject
to pursuant to the law.

Contribution .

         To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by
law; provided, however: (i) no contribution shall be made under circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6 of this Agreement, (ii) no Person involved in the sale of Registrable Securities which Person is
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) in connection with such sale shall be entitled to
contribution from any Person involved in such sale of Registrable Securities who was not guilty of fraudulent misrepresentation; and (iii)
contribution by any seller of Registrable Securities shall be limited in amount to the amount of net proceeds received by such seller from the
applicable sale of such Registrable Securities pursuant to such Registration Statement. Notwithstanding the provisions of this Section 7, no
Buyer shall be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such
Buyer from the applicable sale of the Registrable Securities subject to the Claim exceeds the amount of any damages that such Buyer has
otherwise been required to pay, or would otherwise be required to pay under Section 6(b), by reason of such untrue or alleged untrue statement
or omission or alleged omission.

Amendment of Registration Rights .

         Provisions of this Agreement may be amended only with the written consent of the Company and the Required Holders. Any
amendment effected in accordance with this Section 8 shall be binding upon each Buyer and the Company, provided that no such amendment
shall be effective to the extent that it (1) applies to less than all of the holders of the holders of Registrable Securities, (2) imposes any
obligation or liability on any Buyer without such Buyer’s prior written consent (which may be granted or withheld in such Buyer’s sole
discretion) or (3) applies retroactively. No waiver shall be effective unless it is in writing and signed by an authorized representative of the
waiving party, provided that the Required Holders (in a writing signed by all of the Required Holders) may waive any provision of this
Agreement, and any waiver of any provision of this Agreement made in conformity with the provisions of this Section 8 shall be binding on
each Buyer, provided that no such waiver shall be effective to the extent that it (1) applies to less than all the Buyers (unless a party gives a
waiver as to itself only) or (2) imposes any obligation or liability on any Buyer without such Buyer’s prior written consent (which may be
granted or withheld in such Buyer’s sole discretion). No consideration shall be offered or paid to any Person to amend or consent to a waiver or
modification of any provision of this Agreement unless the same consideration also is offered to all of the parties to this Agreement.


                                                                       14
Miscellaneous .

         Solely for purposes of this Agreement, a Person is deemed to be a holder of Registrable Securities whenever such Person owns, or is
deemed to own, of record such Registrable Securities. If the Company receives conflicting instructions, notices or elections from two or more
Persons with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from
such record owner of such Registrable Securities.

         Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be
in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); (iii) with respect to
Section 3(c), by e-mail (provided confirmation of transmission is electronically generated and kept on file by the sending party); or (iv) one (1)
Business Day after deposit with a nationally recognized overnight delivery service with next day delivery specified, in each case, properly
addressed to the party to receive the same. The addresses, facsimile numbers and e-mail addresses for such communications shall be:

         If to the Company:              IceWEB, Inc.
                                         22900 Shaw Road, Suite 111
                                         Sterling, VA 20166
                                         Telephone: (571) 287-2388
                                         Facsimile: (571) 287-2396
                                         E-mail:
                                         Attention: Chief Executive Officer

         If to Legal Counsel:            Sichenzia Ross Friedman Ference LLP
                                         61 Broadway, 32 nd Floor
                                         New York, New York 10006
                                         Telephone: (212) 930-9700
                                         Facsimile: (212) 930-9725
                                         E-mail: mross@srff.com
                                         Attention: Marc J. Ross, Esq.

         If to a Buyer, to its address, facsimile number or e-mail address (as the case may be) set forth on the Subscription Agreement executed
by such Buyer, or to such other address, facsimile number and/or e-mail address and/or to the attention of such other Person as the recipient
party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change. Written confirmation of
receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the
sender’s facsimile machine or e-mail transmission containing the time, date and recipient facsimile number or e-mail address or (C) provided
by a courier or overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally
recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.


                                                                       15
          Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof. The Company and each Buyer acknowledge and agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that each party hereto shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement by any other party hereto and to enforce specifically the terms and provisions hereof (without the necessity of showing
economic loss and without any bond or other security being required), this being in addition to any other remedy to which any party may be
entitled by law or equity.

         All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal
laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New
York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in New York, New York, for the adjudication of
any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court,
that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each
party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in
any manner permitted by law. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.


                                                                         16
         This Agreement, the other Transaction Documents, the schedules and exhibits attached hereto and thereto and the instruments
referenced herein and therein constitute the entire agreement among the parties hereto and thereto solely with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein.
This Agreement, the other Transaction Documents, the schedules and exhibits attached hereto and thereto and the instruments referenced herein
and therein supersede all prior agreements and understandings among the parties hereto solely with respect to the subject matter hereof and
thereof; provided, however, nothing contained in the Memorandum or any other Transaction Document shall (or shall be deemed to) (i) have
any effect on any agreements any Buyer has entered into with, or any instrument that any Buyer received from, the Company or any of its
subsidiaries prior to the date hereof with respect to any prior investment made by such Buyer in the Company, (ii) waive, alter, modify or
amend in any respect any obligations of the Company or any of its subsidiaries or any rights of or benefits to any Buyer or any other Person in
any agreement entered into prior to the date hereof between or among the Company and/or any of its subsidiaries and any Buyer or any
instrument that any Buyer received prior to the date hereof from the Company and/or any of its subsidiaries and all such agreements and
instruments shall continue in full force and effect or (iii) limit any obligations of the Company under the Memorandum or any other
Transaction Document.

        (c) This Agreement shall inure to the benefit of and be binding upon the permitted successors and assigns of each of the parties hereto.
This Agreement is not for the benefit of, nor may any provision hereof be enforced by, any Person, other than the parties hereto.

         The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
Unless the context clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine, feminine, neuter, singular and
plural forms thereof. The terms “including,” “includes,” “include” and words of like import shall be construed broadly as if followed by the
words “without limitation.” The terms “herein,” “hereunder,” “hereof” and words of like import refer to this entire Agreement instead of just
the provision in which they are found.

         This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and delivered to the other party. In the event that any signature is
delivered by facsimile transmission or by an e-mail which contains a portable document format (.pdf) file of an executed signature page, such
signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same
force and effect as if such signature page were an original thereof.

        Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents as any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.


                                                                       17
         The obligations of each Buyer under this Agreement and the other Transaction Documents are several and not joint with the
obligations of any other Buyer, and no Buyer shall be responsible in any way for the performance of the obligations of any other Buyer under
this Agreement or any other Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by
any Buyer pursuant hereto or thereto, shall be deemed to constitute the Buyers as, and the Company acknowledges that the Buyers do not so
constitute, a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Buyers are in any
way acting in concert or as a group or entity with respect to such obligations or the transactions contemplated by the Transaction Documents or
any matters, and the Company acknowledges that the Buyers are not acting in concert or as a group, and the Company shall not assert any such
claim, with respect to such obligations or the transactions contemplated by this Agreement or any of the other the Transaction Documents.
Each Buyer shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this
Agreement or out of any other Transaction Documents, and it shall not be necessary for any other Buyer to be joined as an additional party in
any proceeding for such purpose. The use of a single agreement with respect to the obligations of the Company contained herein was solely in
the control of the Company, not the action or decision of any Buyer, and was done solely for the convenience of the Company and not because
it was required or requested to do so by any Buyer. It is expressly understood and agreed that each provision contained in this Agreement and
in each other Transaction Document is between the Company and an Buyer, solely, and not between the Company and the Buyers collectively
and not between and among Buyers.

                                                            [ signature pages follow ]


                                                                        18
       IN WITNESS WHEREOF , Buyer and the Company have caused their respective signature page to this Registration Rights
Agreement to be duly executed as of the date first written above.

                                                            COMPANY:

                                                            ICEWEB, INC.

                                                            By:
                                                                  Name:
                                                                  Title:
       IN WITNESS WHEREOF , Buyer and the Company have caused their respective signature page to this Registration Rights
Agreement to be duly executed as of the date first written above.

                                                            BUYER:

                                                            IF BUYER IS AN ENTITY :

                                                            ______________________________________
                                                            [PRINT NAME OF ENTITY]

                                                            By: ___________________________________
                                                                Print name of signatory ________________
                                                                Title _______________________________

                                                            IF BUYER IS AN INDIVIDUAL

                                                            ______________________________________
                                                            Print name _____________________________

                                                            _______________________________________
                                                            Print name: _____________________________

                                                            [ ALL BUYERS MUST SIGN]
                                                                                                                                   EXHIBIT B

                                                        SELLING STOCKHOLDERS

          The shares of common stock being offered by the selling stockholders are those issued to the selling stockholders and those issuable to
the selling stockholders upon exercise of the warrants. For additional information regarding the issuance of the common stock and the warrants,
see “Private Placement of Common Stock and Warrants” above. We are registering the shares of common stock in order to permit the selling
stockholders to offer the shares for resale from time to time. Except for the ownership of the common stock and the warrants issued pursuant to
the Securities Purchase Agreement, the selling stockholders have not had any material relationship with us within the past three years.

         The table below lists the selling stockholders and other information regarding the beneficial ownership (as determined under Section
13(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder) of the shares of common stock held by
each of the selling stockholders. The second column lists the number of shares of common stock beneficially owned by the selling
stockholders, based on their respective ownership of shares of common stock and warrants, as of ________, 20___, assuming exercise of the
warrants held by each such selling stockholder on that date but taking account of any limitations on exercise set forth therein.

         The third column lists the shares of common stock being offered by this prospectus by the selling stockholders and does not take into
account any limitations on exercise of the warrants set forth therein.

         In accordance with the terms of a registration rights agreement with the holders of the common stock and the warrants, this prospectus
generally covers the resale of the sum of (i) the shares of common stock issued to the selling stockholders and (ii) the maximum number of
shares of common stock issuable upon exercise of the warrants determined as if the outstanding warrants were exercised in full (without regard
to any limitations on exercise contained therein) as of the trading day immediately preceding the date this registration statement was initially
filed with the SEC. The fourth column assumes the sale of all of the shares offered by the selling stockholders pursuant to this prospectus.

         Under the terms of the warrants, a selling stockholder may not exercise the warrants to the extent (but only to the extent) such selling
stockholder or any of its affiliates would beneficially own a number of shares of our common stock which would exceed 4.9% or 9.9% (as
applicable). The number of shares in the second column reflects these limitations. The selling stockholders may sell all, some or none of their
shares in this offering. See “Plan of Distribution.”
                                                     Maximum Number of
                                                      Shares of Common
                                                            Stock to
                               Number of Shares of    be Sold Pursuant to   Number of Shares of
                              Common Stock Owned              this          Common Stock Owned
Name of Selling Stockholder     Prior to Offering         Prospectus           After Offering
                                                          PLAN OF DISTRIBUTION

         We are registering the shares of common stock issued to the selling stockholders and the shares of common stock issuable upon
exercise of the warrants to permit the resale of these shares of common stock by the selling stockholders from time to time after the date of this
prospectus. We will not receive any of the proceeds from the sale by the selling stockholders of the shares of common stock. We will bear all
fees and expenses incident to our obligation to register the shares of common stock.

         The selling stockholders may sell all or a portion of the shares of common stock held by them and offered hereby from time to time
directly or through one or more underwriters, broker-dealers or agents. If the shares of common stock are sold through underwriters or
broker-dealers, the selling stockholders will be responsible for underwriting discounts or commissions or agent’s commissions. The shares of
common stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices
determined at the time of sale or at negotiated prices. These sales may be effected in transactions, which may involve crosses or block
transactions, pursuant to one or more of the following methods:

             on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;

             in the over-the-counter market;

             in transactions otherwise than on these exchanges or systems or in the over-the-counter market;

             through the writing or settlement of options, whether such options are listed on an options exchange or otherwise;

             ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

             block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block
              as principal to facilitate the transaction;

             purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

             an exchange distribution in accordance with the rules of the applicable exchange;

             privately negotiated transactions;

             short sales made after the date the Registration Statement is declared effective by the SEC;

             broker-dealers may agree with a selling securityholder to sell a specified number of such shares at a stipulated price per share;
             a combination of any such methods of sale; and

             any other method permitted pursuant to applicable law.

         The selling stockholders may also sell shares of common stock under Rule 144 promulgated under the Securities Act of 1933, as
amended, if available, rather than under this prospectus. If the selling stockholders effect such transactions by selling shares of common stock
to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of
discounts, concessions or commissions from the selling stockholders or commissions from purchasers of the shares of common stock for whom
they may act as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters,
broker-dealers or agents may be in excess of those customary in the types of transactions involved). In connection with sales of the shares of
common stock or otherwise, the selling stockholders may enter into hedging transactions with broker-dealers, which may in turn engage in
short sales of the shares of common stock in the course of hedging in positions they assume. The selling stockholders may also sell shares of
common stock short and deliver shares of common stock covered by this prospectus to close out short positions and to return borrowed shares
in connection with such short sales. The selling stockholders may also loan or pledge shares of common stock to broker-dealers that in turn
may sell such shares.

          The selling stockholders may pledge or grant a security interest in some or all of the warrants or shares of common stock owned by
them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of
common stock from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable
provision of the Securities Act amending, if necessary, the list of selling stockholders to include the pledgee, transferee or other successors in
interest as selling stockholders under this prospectus. The selling stockholders also may transfer and donate the shares of common stock in
other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for
purposes of this prospectus.

          To the extent required by the Securities Act and the rules and regulations thereunder, the selling stockholders and any broker-dealer
participating in the distribution of the shares of common stock may be deemed to be “underwriters” within the meaning of the Securities Act,
and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions
or discounts under the Securities Act. At the time a particular offering of the shares of common stock is made, a prospectus supplement, if
required, will be distributed, which will set forth the aggregate amount of shares of common stock being offered and the terms of the offering,
including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the
selling stockholders and any discounts, commissions or concessions allowed or re-allowed or paid to broker-dealers. Each selling stockholder
has informed us that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the
shares of common stock in violation of any applicable securities laws. In no event shall any broker-dealer receive fees, commissions and
markups which, in the aggregate, would exceed eight percent (8%).
          Under the securities laws of some states, the shares of common stock may be sold in such states only through registered or licensed
brokers or dealers. In addition, in some states the shares of common stock may not be sold unless such shares have been registered or qualified
for sale in such state or an exemption from registration or qualification is available and is complied with.

          There can be no assurance that any selling stockholder will sell any or all of the shares of common stock registered pursuant to the
registration statement, of which this prospectus forms a part.

          The selling stockholders and any other person participating in such distribution will be subject to applicable provisions of the
Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, including, without limitation, to the extent applicable,
Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the shares of common stock by the selling
stockholders and any other participating person. To the extent applicable, Regulation M may also restrict the ability of any person engaged in
the distribution of the shares of common stock to engage in market-making activities with respect to the shares of common stock. All of the
foregoing may affect the marketability of the shares of common stock and the ability of any person or entity to engage in market-making
activities with respect to the shares of common stock.

           We will pay all expenses of the registration of the shares of common stock pursuant to the registration rights agreement, estimated to
be $[ ] in total, including, without limitation, Securities and Exchange Commission filing fees and expenses of compliance with state
securities or “blue sky” laws; provided, however, a selling stockholder will pay all underwriting discounts and selling commissions, if any. We
will indemnify the selling stockholders against liabilities, including some liabilities under the Securities Act in accordance with the registration
rights agreements or the selling stockholders will be entitled to contribution. We may be indemnified by the selling stockholders against civil
liabilities, including liabilities under the Securities Act that may arise from any written information furnished to us by the selling stockholder
specifically for use in this prospectus, in accordance with the related registration rights agreements or we may be entitled to contribution.

          We agreed to keep this prospectus effective until the earlier of (i) the date on which the shares may be resold by the selling
stockholders without registration and without regard to any volume or manner-of-sale limitations by reason of Rule 144, without the
requirement for us to be in compliance with the current public information under Rule 144 under the Securities Act or any other rule of similar
effect or (ii) all of the shares have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect.

         Once sold under the registration statement, of which this prospectus forms a part, the shares of common stock will be freely tradable in
the hands of persons other than our affiliates.
EXHIBIT 23.1

                           CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the use of our report dated December 22, 2011 on the financial statements of IceWeb, Inc. for the years ended September 30,
2011 and 2010, included herein on the Registration Statement of IceWeb, Inc. on Form S-1, SEC File No. 333-167501, and to the reference to
our firm under the heading “Experts” in the prospectus.

                                                                     /s/ Sherb & Co., LLP
                                                                     Certified Public Accountants

Boca Raton, Florida
August 17, 2012