Increase in Outstanding Shares

During the period from July 1, 2013 through July 31, 2013, the Company issued 1,588,932 shares through grants of common stock to employees as compensation and through the execution of warrants. Employee stock grants totaled 179,000 shares at $1.09 per share at an aggregate cost of $195,110. Stock issued through warrant execution totaled 1,409,932 shares at $0.30 per share for aggregate proceeds to the Company of $42,380.

Entry into a material definitive agreement

On August 1, 2013, the Company entered into an Equipment Lease/Option to Purchase Agreement (“Agreement” or “Lease”) with TransCanada Keystone Pipeline, L.P. by its agent TC Oil Pipeline Operations, Inc. (“TransCanada”), dated effective as of July 17, 2013. In accordance with the terms and conditions of the Agreement, TransCanada has agreed to lease, install, maintain, operate and test the effectiveness of the Company’s AOT technology and equipment on one of TransCanada’s operating pipelines. Under terms of the Agreement the Company will deliver the Equipment to TransCanada to be installed and placed in operation by TransCanada, at TransCanada’s expense, on a date estimated to be no later than March 1, 2014. The initial term of the lease is six (6) months, with an option to extend the lease for an additional eighty-four (84) months. TransCanada has an option to purchase equipment during the term of the lease.