S-4/A

Position

Robert Barra

Co-Chief Executive Officer and Director

Michael A. Vitale

Co-Chief Executive Officer and Director

Chief Strategy Officer

As filed with the Securities and Exchange Commission on February 8, 2008

Registration No. 333-147883

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 1

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

JAG MEDIA HOLDINGS, INC.

(Exact name of registrant as specified in its charter)


NEVADA	8999	88-0380546
(State or jurisdiction of incorporation or organization)	(Primary Industrial Classification Code Number)	(I.R.S Employer Identification Number)

JAG MEDIA HOLDINGS, INC.

6865 SW 18TH STREET

SUITE B-13

BOCA RATON, FLORIDA 33433

(866) 300-7410

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

THOMAS J. MAZZARISI

CHAIRMAN AND CHIEF EXECUTIVE OFFICER

JAG MEDIA HOLDINGS, INC.

6865 SW 18TH STREET

SUITE B-13

BOCA RATON, FLORIDA 33433

(866) 300-7410

(Name and address, including zip code, and telephone number, including area code, of agent for service)

Copies to:


W. PRESTON TOLLINGER, JR., ESQ. MORGAN, LEWIS & BOCKIUS LLP 101 PARK AVENUE NEW YORK, NY 10178 TEL: 212-309-6000 FAX: 212-309-6001		MICHAEL I. STOLZAR, ESQ. KARLEN & STOLZAR, LLP WHITE PLAINS PLAZA ONE NORTH BROADWAY — SUITE 509 WHITE PLAINS, NEW YORK 10601 TEL: 914-949-4600 FAX: 914-931-7006

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

If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. o

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) 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. o

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. o

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.

CONSENT SOLICITATION AND PROSPECTUS FOR CRYPTOMETRICS STOCKHOLDERS

This Consent Solicitation/Prospectus is being provided to Cryptometrics stockholders in connection with a proposed merger of Cryptometrics with a subsidiary of JAG Media as provided in an agreement and plan of merger dated December 27, 2005, as amended to date (“Merger Agreement”).

This Consent Solicitation/Prospectus is being mailed to Cryptometrics stockholders to solicit their written consent to an action to authorize the Merger Agreement, which the majority stockholders of Cryptometrics are contractually obligated to authorize, and describe the Merger Agreement as it has been amended to date.

Pursuant to the Merger Agreement, Cryptometrics stockholders, including those who are currently holding shares in its Canadian subsidiary exchangeable for Cryptometrics common stock, will receive 394,700,016 shares of JAG Media common stock, par value $0.00001 per share (“JAG Media Common Stock”), as follows:


	•	The holders of 10,500 shares of Cryptometrics common stock with special subscription rights will be entitled to receive shares of JAG Media Common Stock with a fixed value, based on the post-merger opening price of such shares as shown on the Pink Sheets, equal to 125% of the $10 per share purchase price of their Cryptometrics common stock, for an aggregate of $131,250 fixed value of shares of JAG Media Common Stock.

	•	The holders of 769,250 shares of Cryptometrics common stock with special subscription rights will be entitled to receive shares of JAG Media Common Stock with a fixed value, based on the post-merger opening price of such shares as shown on the Pink Sheets, equal to 200% of the $10 per share purchase price of their Cryptometrics common stock, for an aggregate of $15,385,000 fixed value of shares of JAG Media Common Stock.

	•	All other holders of approximately 11,202,000 shares of Cryptometrics common stock including holders of exchangeable shares of its Canadian subsidiary, will be entitled to receive the remaining shares of JAG Media Common Stock pro rata to their shareholdings. Neither the value nor number of shares of JAG Media Common Stock to be received by such shareholders is determinable at this time.

See page 39 for a full definition and example of the exchange multiple described above.

JAG Media Common Stock currently trades “Over-the-Counter” and is quoted on the Pink Sheets under the symbol “JAGH”. On January 31, 2008, the closing bid price of JAG Media’s Common Stock as reported on the Pink Sheets was $0.88 per share. Cryptometrics common stock is not traded on any recognized stock exchange.

Holders of Cryptometrics common stock who do not submit a written consent to authorize the Merger Agreement and who perfect their appraisal rights will be entitled to appraisal rights with respect to their shares of Cryptometrics common stock in accordance with the provisions of the Delaware General Corporation Law.

The current date set for the merger to occur (the “Closing”) is March 7, 2008. However, JAG Media and Cryptometrics may agree to postpone such date. To be accepted your written consent must be received by Cryptometrics prior to the Closing, but in any case prior to 20 days after the mailing of this Consent Solicitation/Prospectus.

NOTE: Do not send in your stock certificates for shares of Cryptometrics common stock until you have been notified by Cryptometrics. Due to arrangements being made by Cryptometrics with the transfer agent to expedite your receipt of JAG Media shares, you will not be required to submit your current Cryptometrics stock certificates.

See “Risk Factors” on page 12 for a discussion of certain risks that you should consider before participating in the exchange offer.

NEITHER THE U.S. SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

February , 2008

APPENDICES


	Appendix A			Form of Written Consent of Stockholder(s) of Cryptometrics, Inc. in Lieu of Meeting
	Appendix B			Amendments to Article First and Article Fourth of the Articles of Incorporation of JAG Media Holdings, Inc.
	Appendix C-1			Merger Agreement dated as of December 27, 2005 by and among JAG Media Holdings, Inc., Cryptometrics Acquisition, Inc. and Cryptometrics, Inc.
				Exhibit A — Company Voting and Lock-Up Agreement
				Exhibit B — Certificate of Merger
				Exhibit C — Affiliate Agreement
	Appendix C-2			Amendment to Merger Agreement, dated January 24, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Robert Barra, Michael Vitale, Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Thomas J. Mazzarisi and Stephen J. Schoepfer
	Appendix C-3			Amendment to Merger Agreement, dated February 26, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Robert Barra, Michael Vitale, Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Thomas J. Mazzarisi and Stephen J. Schoepfer
	Appendix C-4			Amendment to Merger Agreement, dated April 2, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Robert Barra, Michael Vitale, Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Thomas J. Mazzarisi, and Stephen J. Schoepfer
	Appendix C-5			Amendment to Merger Agreement, dated April 20, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Robert Barra, Michael Vitale, Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Thomas J. Mazzarisi, and Stephen J. Schoepfer
	Appendix C-6			Amendment to Merger Agreement, dated May 11, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Robert Barra, Michael Vitale, Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Thomas J. Mazzarisi, and Stephen J. Schoepfer
	Appendix C-7			Amendment to Merger Agreement, dated May 18, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Robert Barra, Michael Vitale, Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Thomas J. Mazzarisi, and Stephen J. Schoepfer
	Appendix C-8			Amendment to Merger Agreement, dated June 15, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Robert Barra, Michael Vitale, Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Thomas J. Mazzarisi and Stephen J. Schoepfer
	Appendix C-9			Amendment to Merger Agreement, dated July 16, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Robert Barra, Michael Vitale, Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Thomas J. Mazzarisi and Stephen J. Schoepfer
	Appendix C-10			Amendment to Merger Agreement, dated August 16, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Robert Barra, Michael Vitale, Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Thomas J. Mazzarisi and Stephen J. Schoepfer
	Appendix C-11			Amendment to Merger Agreement, dated November 7, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Robert Barra, Michael Vitale, Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Thomas J. Mazzarisi and Stephen J. Schoepfer
	Appendix C-12			Amendment to Merger Agreement, dated February 6, 2008, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Robert Barra, Michael Vitale, Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Thomas J. Mazzarisi and Stephen J. Schoepfer
	Appendix D			Section 262 of the Delaware General Corporation Law (Appraisal Rights)
	Appendix E			Form of Employment Agreement
				Exhibit A — Option Agreement
				Exhibit B — Release of Claims Agreement

QUESTIONS AND ANSWERS ABOUT THE MERGER


Q:		WHY HAS CRYPTOMETRICS NOT SCHEDULED A STOCKHOLDERS’ MEETING?

A:		As permitted under Delaware law, Cryptometrics stockholders holding a majority of the outstanding shares of Cryptometrics common stock, par value $0.001 per share, (“Cryptometrics Common Stock”) have agreed to approve the Merger Agreement without the need for a meeting by providing their written consents. The majority shareholders are Robert Barra and Michael A. Vitale, who each own 28.07% of the outstanding Cryptometrics Common Stock entitled to vote on the Merger Agreement.

Q:		IF I DECIDE NOT TO GIVE MY CONSENT TO THE MERGER, HOW WILL MY SHARES OF CRYPTOMETRICS COMMON STOCK BE AFFECTED?

A:		As the holders of a majority of the outstanding shares of Cryptometrics Common Stock entitled to vote have agreed to provide their written consents to authorize the Merger Agreement, the Merger may take place as scheduled regardless of whether or not you consent in writing.

Q:		HOW DO I PARTICIPATE IN THE CONSENT SOLICITATION?

A:		If you are a Cryptometrics shareholder entitled to vote as of the close of business on December 5, 2007, you are requested to complete and sign the enclosed “Written Consent of Stockholder(s) of Cryptometrics, Inc. In Lieu of Meeting” as it relates to your Cryptometrics Common Stock and return it using the pre-addressed envelope provided to you. A form of such consent is also attached as Appendix A.

Q:		WILL I HAVE TO PAY ANY FEES OR COMMISSIONS IF I CONSENT TO THE MERGER?

A:		No.

Q:		WHAT WILL CRYPTOMETRICS STOCKHOLDERS RECEIVE IN THE MERGER?

A:		Holders of shares of Cryptometrics Common Stock issued and outstanding immediately prior to the time the Certificate of Merger is filed with the Delaware Secretary of State, including as outstanding for this purpose the total number of shares of Cryptometrics Common Stock (the “Cryptometrics Exchange Shares”) for which outstanding exchangeable shares of Cryptometrics’ Canadian subsidiary, Cryptometrics Canada, Inc. (the “Exchangeable Shares”), can be exchanged, will be entitled to receive 394,700,016 shares of fully paid and nonassessable JAG Media Common Stock (the “Merger Consideration”).

		The number of shares of JAG Media Common Stock to be issued in connection with the merger carried out pursuant to the Merger Agreement (“Merger”) is fixed and will not be adjusted based upon changes in the value of those shares.


		Such shares of JAG Media Common Stock receivable by the holders of Cryptometrics Common Stock (including the Cryptometrics Exchange Shares) will represent approximately 87% of the outstanding shares of the merged companies after the Merger is consummated.


		Holders of Cryptometrics Common Stock will in general receive shares of JAG Media Common Stock in proportion to their holdings of Cryptometrics Common Stock compared to all outstanding shares of Cryptometrics Common Stock (including as outstanding the Cryptometrics Exchange Shares) at the time of the Merger, subject to certain adjustments. A limited number of Cryptometrics stockholders holding 779,750 shares of Cryptometrics Common Stock, as of April 30, 2007, by virtue of subscription agreements with Cryptometrics, will receive a greater or lesser number of a merger candidate’s shares (in this case JAG Media shares). They will be entitled to own shares of the merger candidate’s common stock (now JAG Media Common Stock) with an aggregate fixed value following the effectiveness of the Merger (based on the post-Merger opening price on the OTC Bulletin Board or Pink Sheets) of $15,516,250, equal to 200% (in the case of 769,250 shares of Cryptometrics Common Stock) or 125% (in the case of 10,500 shares of Cryptometrics Common Stock) of the original aggregate purchase price of their shares of Cryptometrics Common Stock under their subscription agreements, which in each case was $10.00 per share. The remaining number of shares of JAG Media Common Stock available to other stockholders of Cryptometrics will then be shared by such other stockholders pro rata to the number of shares held by each compared to the aggregate number shares of Cryptometrics Common Stock

iii


		(including the Cryptometrics Exchange Shares) held by all of such other stockholders (including the holders of the Exchangeable Shares). Such other Cryptometrics stockholders will not know the amount or value of the JAG Media Common Stock that they will receive until after the Merger is consummated.

		No fractional shares of JAG Media Common Stock shall be issued in connection with the Merger.

Q:		SHOULD I SEND IN MY STOCK CERTIFICATES NOW?

A:		No. You do not need to do so, and should not send in your stock certificates, whether or not the Merger is completed, until you are notified.

		In order to expedite the necessary share exchange, Cryptometrics is arranging with JAG Media’s transfer agent for a new Direct Registration System to be established. It will reflect the number of shares of JAG Media Common Stock to which each Cryptometrics stockholder is entitled, including an indication of which shares can be sold immediately (35%) and which cannot be sold for one year from Closing (65%). If the Merger is completed, a statement of holdings with such information will be mailed to each stockholder. This statement can be provided to a broker who can then request electronic delivery of free trading positions.

		Alternatively, Cryptometrics stockholders can be sent written instructions for exchanging their stock certificates to obtain physical stock certificates for the JAG Media shares of Common Stock to which they are entitled. Cryptometrics stockholders should note that this will be a more time consuming procedure than utilizing the Direct Registration System.

Q:		WILL CRYPTOMETRICS STOCKHOLDERS BE SUBJECT TO TAXATION?


A:		Cryptometrics and JAG Media have agreed that it is a condition to the Closing of the Merger that Cryptometrics and JAG Media receive an opinion of counsel to the effect that the Merger (together with certain related transactions) will qualify as a “reorganization” under Section 368 of the Internal Revenue Code of 1986, as amended (the “Code”), for U.S. federal income tax purposes. Such opinion will be based on certain assumptions and will rely upon the accuracy of certain representations made by officers of JAG Media and Cryptometrics. Except as noted below, if the Merger is treated as a “reorganization” for U.S. federal income tax purposes, Cryptometrics stockholders will generally not recognize any gain or loss for U.S. federal income tax purposes on the exchange of their Cryptometrics Common Stock for JAG Media Common Stock in the Merger. It is possible that a portion of the JAG Media Common Stock received by Cryptometrics stockholders will be treated as a distribution received on their Cryptometrics shares, with such distribution being taxable as a dividend to the extent of Cryptometrics’s current or accumulated earnings and profits, as determined for United States federal income tax purposes, and thereafter as a return of basis to the extent thereof and then as gain on a deemed disposition of shares. JAG Media believes, based on information received from Cryptometrics, that Cryptometrics will not have current or accumulated earnings and profits for U.S. federal income tax purposes as of the Closing of the Merger. Cryptometrics stockholders should refer to the discussion below in “Material U.S. Federal Income Tax Consequences of the Merger”.


Q:		WHEN IS THE MERGER GOING TO BE COMPLETED?


A:		JAG Media will complete the Merger upon satisfaction or waiver of the closing conditions set forth in the Merger Agreement. The currently scheduled closing date is March 7, 2008, but may be postponed.


Q:		ARE CRYPTOMETRICS STOCKHOLDERS ENTITLED TO APPRAISAL RIGHTS?


A:		Yes. Under Delaware law, holders of Cryptometrics Common Stock will have the right to seek appraisal of the fair value of their shares as determined by the Delaware Court of Chancery if the Merger is completed, but only if they do not provide their written consent authorizing the Merger Agreement, do submit a written demand for an appraisal within 20 days after the date of the mailing of this Consent Solicitation/Prospectus and otherwise comply with the Delaware law procedures explained herein. Written Consents will be accepted prior to the Closing, but in any case no later than the end of such 20 day period. In the event that holders of more than 100,000 shares of Cryptometrics Common Stock choose to exercise their appraisal rights, Cryptometrics will be under no obligation to consummate the Merger.

SUMMARY

This summary contains selected information from this Consent Solicitation/Prospectus and may not contain all of the information that is important to you. To understand the Merger fully and to obtain a more complete description of the legal terms of the Merger, you should carefully read this entire document, including the Merger Agreement and other Appendices, and the documents to which JAG Media refer you. See “Where You Can Find More Information” on page 139.

THE COMPANIES

JAG MEDIA HOLDINGS, INC. (SEE PAGE 79)

JAG Media, a Nevada corporation headquartered in Boca Raton, Florida, provides Internet-based equity information, offering its subscribers a variety of market news through its website, jagnotes.com. JAG Media focuses its marketing efforts on institutional subscribers.

The jagnotes.com website is currently a subscription service which offers subscribers two targeted products:


	•	the JAGNotes (Upgrade/Downgrade) Report, a daily consolidated investment report that summarizes newly issued research, analyst opinions, upgrades, downgrades and analyst coverage changes from various investment banks and brokerage houses; and

	•	the JAG Media Rumor Report where JAG Media posts rumors that have been heard on the street about various stocks.

JAG Media also maintains a JAGNotes (Upgrade/Downgrade) Report faxed-based service for a limited number of mostly institutional subscribers.

On November 24, 2004, through JAG Media’s English subsidiary now named Pixaya (UK) Limited, JAG Media purchased certain development stage software and related assets from TComm Limited, a company also organized in the United Kingdom. At the time of acquisition, TComm Limited was in various stages of development of four software products. JAG Media continued developing SurvayaCam (previously CCMTV), which consists of software programs and related hardware intended to permit field personnel to send real-time video streams from the field to a central location where they can be viewed by one or more persons. Due to the lack of funding, Pixaya (UK) Limited is currently inactive.

The executive offices of JAG Media are located at 6865 SW 18th Street, Suite B-13, Boca Raton, Florida 33433. JAG Media’s telephone number is (866) 300-7410. JAG Media’s website is located at www.jagnotes.com and www.pixaya.com.

CRYPTOMETRICS ACQUISITION, INC.

Cryptometrics Acquisition, Inc., a Delaware corporation, referred to as Merger Sub, is a wholly-owned subsidiary of JAG Media formed solely in connection with the proposed Merger. Upon successful completion of the Merger, Merger Sub will be merged with and into Cryptometrics and will cease to exist as a separate corporation. If the Merger is not consummated as planned, JAG Media has undertaken to cause Merger Sub to change its name to a name not including “Cryptometrics”.

Merger Sub’s principal executive offices are located c/o JAG Media, 6865 SW 18th Street, Suite B-13, Boca Raton, Florida 33433. Merger Sub’s telephone number is (886) 300-7410.

CRYPTOMETRICS, INC. (SEE PAGE 110)

Cryptometrics, a Delaware corporation headquartered in Tuckahoe, New York, is a security solution provider using cryptography and biometrics technologies to protect computerized systems, information and physical points of access to secure sensitive areas. Cryptometrics’ technology can be applied to any business or group of users seeking security solutions for biometric authentication, encrypted storage, network access and secure electronic transmission of sensitive data. Cryptometrics’ wholly-owned subsidiary, Cryptometrics Canada, Inc. (formerly known as BioDentity Systems Corporation), specializes in providing face biometric authentication technologies specifically designed to strengthen border control, aviation security and homeland defense. Cryptometrics’ website is located at www.cryptometrics.com.

The executive offices of Cryptometrics are located at 73 Main Street, Tuckahoe, New York 10707. Cryptometrics’ telephone number is (914) 274-6140.

2006 JAG MEDIA STOCKHOLDERS ANNUAL MEETING

The 2006 Annual Meeting of the JAG Media Stockholders was held on Wednesday, April 26, 2006. The following matters, among other things, were voted upon as required by the Merger Agreement and approved at such Annual Meeting: (a) the proposal to amend Article Fourth of the Amended and Restated Articles of Incorporation to increase the authorized shares of JAG Media Common Stock from 250,000,000 to 500,000,000; and (b) the proposal to amend Article First of the Amended and Restated Articles of Incorporation to change JAG Media’s name to “Cryptometrics, Inc.” upon the consummation of the Merger.

THE CONSENT SOLICITATION (SEE PAGE 35)

Cryptometrics seeks the written consent of the holders of record of Cryptometrics Common Stock as of the close of business on December 5, 2007 to authorize the Merger Agreement. Pursuant to the terms of the Company Voting and Lock-Up Agreement, attached as Exhibit A to Appendix C-1, the holders of a majority of the Cryptometrics Common Stock entitled to vote on the authorization of the Merger Agreement have agreed to execute written consents authorizing the Merger Agreement. Accordingly, whether or not you provide your consent, the Merger may be consummated as described herein. However, Cryptometrics also requests your consent in writing. If you are in favor of the Merger, please complete the “Written Consent of Stockholder(s) of Cryptometrics, Inc. In Lieu of Meeting” enclosed herewith and mail it using the pre-addressed envelope provided to you. A form of such written consent is also attached as Appendix A. To be accepted your written consent must be received by Cryptometrics prior to the Closing, but in any case prior to 20 days after the mailing of this Consent Solicitation/Prospectus.

THE MERGER

THE MERGER AGREEMENT AND THE AMENDMENTS AND EXHIBITS THERETO ARE ATTACHED TO THIS CONSENT SOLICITATION/PROSPECTUS AS APPENDICES C-1 THROUGH C-12, D AND E. PLEASE READ THE MERGER AGREEMENT, INCLUDING THE AMENDMENTS AND EXHIBITS THERETO. IT IS THE LEGAL DOCUMENT THAT GOVERNS THE TRANSACTION.

GENERAL (SEE PAGE 28)

If the Merger is completed:


	•	Merger Sub will be merged with and into Cryptometrics;

	•	Cryptometrics will become the wholly-owned subsidiary of JAG Media; and

	•	JAG Media’s name will be changed to “Cryptometrics, Inc.”

WHAT CRYPTOMETRICS STOCKHOLDERS WILL RECEIVE IN THE MERGER (SEE PAGE 39)

Holders of shares of Cryptometrics Common Stock issued and outstanding immediately prior to the time the Certificate of Merger is filed with the Delaware Secretary of State, including as outstanding for this purpose the total number of shares of Cryptometrics Common Stock (the “Cryptometrics Exchange Shares”) for which outstanding exchangeable shares of Cryptometrics’ Canadian subsidiary, Cryptometrics Canada, Inc. (the “Exchangeable Shares”), can be exchanged, will be entitled to receive 394,700,016 shares of fully paid and nonassessable JAG Media Common Stock (the “Merger Consideration”).

Holders of Cryptometrics Common Stock will in general receive shares of JAG Media Common Stock in proportion to their holdings of Cryptometrics Common Stock compared to all outstanding shares of Cryptometrics Common Stock (including as outstanding the Cryptometrics Exchange Shares) at the time of the Merger, subject to certain adjustments. A limited number of Cryptometrics stockholders holding 779,750 shares of Cryptometrics Common Stock, by virtue of subscription agreements with Cryptometrics, will receive a greater or lesser number of

JAG Media shares. They will be entitled to own shares of the merger candidate’s common stock (now JAG Media Common Stock) with an aggregate fixed value following the effectiveness of the Merger (based on the post-Merger opening price on the OTC Bulletin Board or Pink Sheets) of $15,516,250, equal to 200% (in the case of 769,250 shares of Cryptometrics Common Stock) or 125% (in the case of 10,500 shares of Cryptometrics Common Stock) of the original aggregate purchase price of their shares of Cryptometrics Common Stock under their subscription agreements, which in each case was $10.00 per share. The remaining number of shares of JAG Media Common Stock available to other stockholders of Cryptometrics will then be shared by such other stockholders pro rata to the number of shares held by each compared to the aggregate number shares of Cryptometrics Common Stock (including the Cryptometrics Exchange Shares) held by all of such other stockholders (including the holders of the Exchangeable Shares). Such other Cryptometrics stockholders will not know the amount or value of the JAG Media Common Stock that they will receive until after the Merger is consummated.

No fractional shares of JAG Media Common Stock shall be issued in connection with the Merger. Unless the value of the fractional share of JAG Media Common Stock which otherwise would have been issued by virtue of the Merger to a Cryptometrics stockholder exceeds an aggregate cash amount of One Dollar ($1.00), determined as provided below, such Cryptometrics stockholder shall not be entitled to receive a cash payment in lieu of a fractional share of JAG Media Common Stock. In the event that the value of the fractional share of JAG Media Common Stock to be issued by virtue of the Merger to a Cryptometrics stockholder exceeds One Dollar ($1.00), any such Cryptometrics stockholder entitled to receive a fractional share of JAG Media Common Stock will be entitled to receive a cash payment in lieu of such fractional share in an amount determined by JAG Media to be equal to such fraction multiplied by the arithmetic mean of the closing prices of JAG Media Common Stock on the Pink Sheets over the 20 trading days ending three trading days prior to the closing date of the transaction. No fractional shares of JAG Media Common Stock shall be issued in connection with the Merger.

The number of shares of JAG Media Common Stock to be issued in connection with the Merger is fixed and will not be adjusted based upon changes in the value of those shares. The value of the shares of JAG Media Common Stock that Cryptometrics stockholders will receive will fluctuate as the market price for JAG Media Common Stock changes. On January 31, 2008 the last reported per share sale price of JAG Media Common Stock as quoted on the Pink Sheets was $0.91 per share. The actual market value of the JAG Media Common Stock to be issued in the Merger, however, will depend on the market price of JAG Media Common Stock on the closing date, which may be more or less than the sale price stated above. Also, there can be no assurance that the value of the JAG Media Common Stock will not decline upon issuance of such shares in the amounts contemplated by the transaction, even if the sale of the shares is restricted as described above.

Immediately after the Merger, Cryptometrics stockholders (including holders of the Exchangeable Shares) will own (or be entitled to) 394,700,016 shares of JAG Media Common Stock, equivalent to approximately 87% of the outstanding JAG Media Common Stock.

REASONS FOR THE MERGER (SEE PAGES 34)

Cryptometrics believes that JAG Media’s acquisition of Cryptometrics will provide significant benefits to the stockholders of Cryptometrics. The Merger will effectively create a public trading market for Cryptometrics Common Stock. The Board of Directors of Cryptometrics unanimously approved the Merger Agreement and the related Merger.

U.S. FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE 36)

Counsel to JAG Media has opined, based on representations received from officers of JAG Media and Cryptometrics and on certain assumptions, that the Merger (together with certain related transactions) will qualify as a “reorganization” under Section 368 of the Code for U.S. federal income tax purposes. The representations relied upon include a representation to the effect that, based on values as of the last business day before the closing date for the Merger, the aggregate fair market value of the JAG Media Common Stock and other consideration received by each holder of Cryptometrics Common Stock will be approximately equal to the fair market value of the Cryptometrics Common Stock surrendered by such holder in exchange therefor pursuant to the Merger. Such opinion is also subject to certain qualifications, including, without limitation, the qualification that it is based on law

in effect on the date of the opinion. Except as noted below, if the Merger (together with certain related transactions) is treated as a reorganization for U.S. federal income tax purposes, holders of Cryptometrics Common Stock will generally not recognize any gain or loss for U.S. federal income tax purposes on the exchange of shares of Cryptometrics Common Stock for JAG Media Common Stock in the Merger It is possible, notwithstanding treatment as a reorganization, that a portion of the JAG Media Common Stock received by Cryptometrics stockholders (generally, that portion of such shares as is determined to be attributable to payments by Cryptometrics of JAG Media expenses) will be treated, for U.S. federal income tax purposes, as a distribution received on their Cryptometrics shares, with such distribution being taxable as a dividend to the extent of Cryptometric’s current or accumulated earnings and profits (as determined for U.S. federal income tax purposes), and thereafter as a return of basis to the extent thereof and then as gain on a deemed disposition of shares. JAG Media believes, based on information received from Cryptometrics, that Cryptometrics will not have current or accumulated earnings and profits for U.S. federal income tax purposes as of the Closing of the Merger.

ACCOUNTING TREATMENT (SEE PAGE 36)

For financial statement purposes, Cryptometrics is the acquiring company and this transaction will be treated as a “reverse” purchase by Cryptometrics of JAG Media. The identifiable tangible and intangible assets and the liabilities of JAG Media will be recorded by Cryptometrics at their fair values and any excess cost will ultimately be recorded as goodwill. The assets and liabilities of Cryptometrics will continue to be recorded at their historical carrying values. The reported financial condition and results of operations of the combined companies after the Merger will reflect these values, but will not be retroactively restated to reflect the historical financial position or results of JAG Media.

MARKET PRICE INFORMATION (SEE PAGE 92)

JAG Media Common Stock currently trades “Over-the-Counter” and is quoted on the Pink Sheets under the symbol “JAGH.” On September 8, 2005, the last full trading day before the public announcement of the execution of a non-binding term sheet relating to the proposed Merger, the last reported per share sales price of JAG Media Common Stock on the Pink Sheets was $0.12. On December 23, 2005, the last full trading day before the public announcement of the execution of the agreement and plan of merger on December 27, 2005, the last reported per share sales price of JAG Media Common Stock on the Pink Sheets was $0.35. On February 6, 2008, the most recent practicable date prior to the filing of this Consent Solicitation/Prospectus, the last reported per share sales price for JAG Media Common Stock was $0.98.

Cryptometrics Common Stock is not publicly held or traded on any recognized securities market.

LISTING OF JAG MEDIA COMMON STOCK

JAG Media intends for the shares of JAG Media Common Stock, including those issued in connection with the Merger, to trade on the OTC Pink Sheets under the new name “Cryptometrics, Inc.” and a new symbol.

OWNERSHIP OF JAG MEDIA AFTER THE MERGER (SEE PAGE 36)

In connection with the Merger, JAG Media will make available 394,700,016 shares of JAG Media Common Stock for the Cryptometrics stockholders, including the holders of Exchangeable Shares. Upon consummation of the Merger, Cryptometrics stockholders immediately prior to the merger will own approximately 87% of the outstanding shares of JAG Media Common Stock and JAG Media stockholders will own approximately 13% of the outstanding shares of JAG Media Common Stock.

This information is based on the number of shares of JAG Media Common Stock outstanding on January 31, 2008.

TERMS OF JAG MEDIA FINANCING (SEE PAGE 45)

JAG Media currently has outstanding five warrants to purchase an aggregate 11,300,000 shares of JAG Media Common Stock issued to YA Global Investments, L.P. (formerly known as Cornell Capital Partners, L.P.). YA

Global has agreed to amend the exercise prices of such warrants from fixed prices ranging from $0.40 to $0.80 to 88% of the average of the Volume Weighted Average Price of the Common Stock as quoted by Bloomberg, L.P. during the 30 trading days immediately prior to the date the warrant becomes exercisable. Such amendment agreement will terminate if the closing does not occur by the close of business on February 27, 2008.

DIRECTORS & MANAGEMENT OF JAG MEDIA AFTER THE MERGER (SEE PAGE 45)

If the Merger is completed, the directors and executive officers of Cryptometrics just prior to the Effective Time of the Merger are expected to become senior management of JAG Media (to be renamed Cryptometrics, Inc.), including the prior Cryptometrics business and the traditional JAG Media business. The management of Cryptometrics may also appoint additional directors of JAG Media. The existing directors and executive officers of JAG Media and its subsidiary, Pixaya LLC., will resign or be terminated.

CONDITIONS TO COMPLETING THE MERGER (SEE PAGE 55)

The respective obligations of JAG Media, Merger Sub and Cryptometrics to complete the Merger are subject to many conditions, including the following:


	•	there is no law or court order prohibiting the Merger;

	•	the representations and warranties of JAG Media, Merger Sub and Cryptometrics remain accurate in all respects, with permitted exceptions;

	•	each of JAG Media, Merger Sub and Cryptometrics has performed, in all material respects, all of its respective obligations under the Merger Agreement; and

	•	the holders of no more than 100,000 shares of Cryptometrics common stock exercise appraisal rights in connection with the Merger.

TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 57)

JAG Media and Cryptometrics may unilaterally or jointly agree to terminate the Merger Agreement without giving any reason or for no reason at all and abandon the Merger prior to the closing date. If JAG Media unilaterally terminates the Merger Agreement prior to the automatic termination date described below, it must issue 1,000,000 shares of JAG Media Common Stock to Cryptometrics. Either company may also terminate the Merger Agreement if a governmental entity shall have issued an order or taken any other action having the effect of permanently prohibiting the Merger. The Merger Agreement automatically terminates on March 31, 2008, unless the parties agree to extend it.

JAG Media may terminate the Merger Agreement and abandon the Merger prior to the closing date if (i) any condition or obligation of JAG Media contained in the Merger Agreement becomes incapable of fulfillment other than as a result of a breach by JAG Media (and JAG Media does not waive such condition) or (ii) there has been a breach by Cryptometrics of a representation, warranty or covenant contained in the Merger Agreement.

Cryptometrics may terminate the Merger Agreement and abandon the Merger prior to the closing date if (i) any condition or obligation of Cryptometrics contained in the Merger Agreement becomes incapable of fulfillment other than as a result of a breach by Cryptometrics (and such condition is not waived by Cryptometrics), (ii) there has been a breach by JAG Media of a representation, warranty or covenant contained in the Merger Agreement and such breach is not curable within 15 days after written notice of such breach is given to JAG Media by Cryptometrics, (iii) if JAG Media Common Stock shall not have been authorized for trading on the OTC Bulletin Board or Pink Sheets whether or not such authorization shall have been cancelled, or (iv) the holders of more than 100,000 shares of Cryptometrics Common Stock exercise appraisal rights in connection with the Merger.

INTERESTS OF THE DIRECTORS AND OFFICERS OF CRYPTOMETRICS IN THE MERGER (SEE PAGE 69)

Directors and officers of Cryptometrics have interests in the Merger that are different from, or in addition to, your interests as Cryptometrics stockholders. Specifically, if the Merger is completed, the existing directors and executive officers of Cryptometrics will become the directors and are expected to become the senior management of JAG Media (to be renamed Cryptometrics, Inc.).

SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION (SEE PAGE 70)

In accordance with the terms of the Merger Agreement, stockholders of Cryptometrics shall not be permitted to sell or otherwise dispose of sixty-five percent (65%) of the JAG Media Common Stock received in conjunction with the Merger for a period of twelve months from the closing date of the transaction. Subject to compliance with all relevant securities laws, thirty-five percent (35%) of the shares of JAG Media Common Stock issued to the Cryptometrics stockholders in connection with the Merger shall not be subject to the twelve-month lock-up provision. Although Cryptometrics does not have a separate binding agreement with its stockholders regarding the disposition of the JAG Media Common Stock that they are to receive in connection with the Merger, Cryptometrics views them as bound by the described restriction because it is part of the Merger Agreement which requires the approval of the stockholders of Cryptometrics. In any case, the JAG Media Common Stock received by the Cryptometrics stockholders in the Merger will be received subject to such restriction which will be enforced by a mechanism imposed by the transfer agent.

The Form S-4, which includes this prospectus, separately registers the resale of the shares of JAG Media Common Stock issuable in connection with the Merger to the current Co-Chief Executive Officers of Cryptometrics, Robert Barra and Michael A. Vitale, and the current Chief Strategy Officer of Cryptometrics, Joel Shaw, so that such shares shall be saleable by them subject to the lock-up restrictions noted above.

RISK FACTORS (SEE PAGE 12)

The Merger involves a number of risks. The stockholders of Cryptometrics should carefully consider these risks, certain of which are described under the heading “Risk Factors”.

APPRAISAL RIGHTS (SEE PAGE 25)

If the Merger is completed, Cryptometrics stockholders who do not submit a written consent to authorize the Merger Agreement may, under certain circumstances, exercise appraisal rights under the applicable laws of the State of Delaware. Such stockholders may be entitled to appraisal rights with respect to their shares of Cryptometrics Common Stock.

REGULATORY APPROVALS

Once the Registration Statement has been declared effective by the U.S. Securities and Exchange Commission (the “SEC”), the consummation of the Merger Agreement will not be subject to federal or state regulatory approval.

SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF JAG MEDIA

The table below shows selected financial data for JAG Media’s last five fiscal years and the three months ended October 31, 2007 and 2006. JAG Media’s fiscal year ends on July 31 each year. There were no dividends paid during the past five years and the three months ended October 31, 2007. The following selected consolidated financial data should be read in conjunction with JAG Media’s audited consolidated financial statements and unaudited condensed consolidated financial statements and the related notes thereto, Management’s Discussion and Analysis of Financial Condition and Results of Operations and the other financial information included elsewhere in this Consent Solicitation/ Prospectus. The data set forth below with respect to JAG Media’s Consolidated Statements of Operations for the years ended July 31, 2007, 2006 and 2005, Consolidated Balance Sheets as of July 31, 2007 and 2006 and Consolidated Statements of Cash Flows Data for the years ended July 31, 2007, 2006 and 2005 are derived from JAG Media’s audited consolidated financial statements which are included elsewhere in this Consent Solicitation/Prospectus and are qualified by reference to such Consolidated Financial Statements and related Notes thereto. The data set forth below with respect to JAG Media’s Consolidated Statements of Operations for the years ended July 31, 2004 and 2003, Consolidated Balance Sheets as of July 31, 2005, 2004 and 2003 and Consolidated Statements of Cash Flows Data for the years ended July 31, 2004 and 2003 have been derived from JAG Media’s audited consolidated financial statements which are not included elsewhere in this Consent Solicitation/Prospectus. The data set forth below with respect to JAG Media’s Condensed Consolidated Statements of Operations for the three months ended October 31, 2007 and 2006, Condensed Consolidated Balance Sheet as of October 31, 2007 and Condensed Consolidated Statements of Cash Flows Data for the three months ended October 31, 2007 and 2006 are derived from JAG Media’s unaudited condensed consolidated financial statements which are included elsewhere in this Consent Solicitation/Prospectus and are qualified by reference to such Consolidated Financial Statements and related Notes thereto. The data set forth below with respect to JAG Media’s Condensed Consolidated Balance Sheet as of October 31, 2006 have been derived from JAG Media’s unaudited consolidated financial statements which are not included elsewhere in this Consent Solicitation/Prospectus.

The historical results are not necessarily indicative of the operating results to be expected in the future.

SELECTED HISTORICAL FINANCIAL DATA OF JAG MEDIA FOR THE YEARS ENDED
JULY 31, 2007, 2006, 2005, 2004 AND 2003
AND FOR THE THREE MONTHS ENDED OCTOBER 31, 2007 AND 2006


	Year Ended			Year Ended			Year Ended			Year Ended			Year Ended			3 Months Ended			3 Months Ended
	July 31, 2007			July 31, 2006			July 31, 2005			July 31, 2004			July 31, 2003			October 31, 2007			October 31, 2006
																			(Restated)
																			(Unaudited)
																(Unaudited)

STATEMENT OF OPERATIONS DATA:
Revenues	$	203,286		$	166,692		$	239,651		$	253,256		$	385,881		$	36,732		$	43,331

Operating loss	$	(1,720,875	)	$	(2,347,319	)	$	(1,701,616	)	$	(1,984,479	)	$	(2,539,917	)	$	(412,412	)	$	(272,431	)

Net income (loss)	$	(11,775,152	)	$	(3,636,856	)	$	(1,889,165	)	$	(2,005,637	)	$	(2,578,735	)	$	1,331,679		$	(247,652	)

Basic net income (loss) per common share	$	(0.25	)	$	(0.08	)	$	(0.04	)	$	(0.05	)	$	(0.07	)	$	0.03		$	(0.01	)
Diluted net income (loss) per common share	$	(0.25	)	$	(0.08	)	$	(0.04	)	$	(0.05	)	$	(0.07	)	$	0.02		$	(0.01	)
Basic weighted average number of common shares		46,466,147			42,891,017			44,510,641			42,696,349			37,709,338			50,666,552			43,972,608
Diluted weighted average number of common shares		46,466,147			42,891,017			44,510,641			42,696,349			37,709,338			58,080,023			43,972,608
BALANCE SHEET:
Total assets	$	134,349		$	578,233		$	838,102		$	507,373		$	537,654		$	568,749		$	278,423

Long-term obligations	$	2,607,180		$	2,027,089		$	1,927,149		$	—		$	—		$	1,132,420		$	2,196,187

Total liabilities	$	14,773,255		$	5,073,969		$	2,169,570		$	104,695		$	599,548		$	11,203,510		$	4,785,417

Working capital (deficit)	$	(12,086,797	)	$	(2,545,349	)	$	500,203		$	367,392		$	(87,296	)	$	(9,549,962	)	$	(2,394,021	)

Stockholders’ equity (deficiency)	$	(14,638,910	)	$	(4,495,740	)	$	(1,331,472	)	$	402,674		$	(61,808	)	$	(10,634,765	)	$	(4,506,998	)

CASH FLOWS:
Net cash used in operating activities	$	(448,538	)	$	(2,194,376	)	$	(1,524,128	)	$	(1,700,158	)	$	(2,273,100	)	$	(260,705	)	$	(399,572	)

Net cash used in investing activities	$	(15,573	)	$	(40,871	)	$	(51,290	)	$	(29,276	)	$	—		$	—		$	(15,545	)

Net cash provided by financing activities	$	14,000		$	2,025,000		$	1,850,000		$	1,692,500		$	2,689,210		$	398,200		$	—

SELECTED HISTORICAL QUARTERLY FINANCIAL INFORMATION OF JAG MEDIA (UNAUDITED)

The table below shows unaudited selected financial data of JAG Media for each of the quarters in its last two fiscal years. The data set forth below for the quarters ended October 31, 2006, January 31, 2007 and April 30, 2007 have been derived from and should be read in conjunction with the unaudited condensed consolidated financial statements included in the quarterly reports on Form 10-Q that JAG Media has previously filed for those periods and the restated unaudited condensed consolidated statements of operations included in Note 11 to the audited consolidated financial statements of JAG Media included elsewhere in this Consent Solicitation/Prospectus. The data set forth below for the other quarters have been derived from and should be read in conjunction with the unaudited condensed consolidated financial statements included in the quarterly reports on Form 10-Q that JAG Media has previously filed for those periods.


	Fiscal Year		October 31,			January 31,			April 30,			July 31,

Revenues		2007 (restated)*	$	43,331		$	57,806		$	63,171		$	38,978

		2006	$	40,023		$	45,075		$	58,267		$	23,327

Gross profit		2007 (restated)*	$	18,681		$	40,324		$	44,649		$	26,585

		2006	$	14,150		$	26,878		$	46,413		$	(1,856	)

Operating loss		2007 (restated)*	$	(272,431	)	$	(524,994	)	$	(615,343	)	$	(308,107	)

		2006	$	(521,886	)	$	(664,105	)	$	(704,759	)	$	(456,569	)

Net loss		2007 (restated)*	$	(247,652	)	$	(3,430,594	)	$	(1,212,086	)	$	(6,884,820	)

		2006	$	(594,554	)	$	(737,461	)	$	(776,250	)	$	(1,528,591	)

Net loss per common share, basic and diluted		2007 (restated)*	$	(0.01	)	$	(0.07	)	$	(0.03	)	$	(0.14	)
		2006	$	(0.01	)	$	(0.02	)	$	(0.02	)	$	(0.03	)


*		See Note 11 of the Notes to JAG Media’s audited consolidated financial statements.

SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF CRYPTOMETRICS

The following selected consolidated financial data for the years ended April 30, 2007 (as restated) and April 30, 2006 have been derived from Cryptometrics’ audited consolidated financial statements and the related notes, which are included elsewhere in this Consent Solicitation/Prospectus. The following selected financial data for the years ended April 30, 2005 and April 30, 2004 has been derived from Cryptometrics’ audited financial statements which are not included in this Consent Solicitation/Prospectus. The following selected financial data for the year ended April 30, 2003 has been derived from Cryptometrics’ unaudited financial statements which are not included in this Consent Solicitation/Prospectus. The following selected financial data for the fiscal six months ended October 31, 2007 and October 31, 2006 have been derived from Cryptometrics’ unaudited consolidated financial statements and the related notes, which are included elsewhere in this Consent Solicitation/Prospectus. You should read the following selected consolidated financial data together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes included elsewhere in this Consent Solicitation/Prospectus.


	Year Ended		Year Ended		Year Ended		Year Ended		Year Ended		Six Months Ended		Six Months Ended
	30-Apr-07		30-Apr-06		30-Apr-05		30-Apr-04		30-Apr-03		31-Oct-07		31-Oct-06
	(As Restated)								(Unaudited)		(Unaudited)		(Unaudited)

Statement of Operations Data:
Revenues	$	1,293,843	$	215,661	$	681,854	$	242,022	$	—	$	71,742	$	979,127
Operating loss		9,438,016		7,336,817		5,604,090		1,879,598		838,544		4,574,177		4,229,068
Net loss available to common stockholders		9,593,733		6,929,981		5,501,379		1,853,591		839,502		5,250,396		4,149,677
Weighted Average Shares Outstanding		11,973,002		11,439,022		9,514,345		7,703,771		7,302,126		11,981,863		11,971,363
Net loss per common share: Basic & Diluted	$	0.80	$	0.61	$	0.58	$	0.24	$	0.11	$	0.44	$	0.35


Balance Sheet	30-Apr-07			30-Apr-06		30-Apr-05		30-Apr-04			30-Apr-03			31-Oct-07			31-Oct-06

Total assets	$	25,347,147		$	22,879,787	$	23,254,571	$	13,070,881		$	632,695		$	22,010,017		$	31,084,839
Total liabilities		13,204,077			1,368,435		1,819,947		2,183,532			1,286,570			14,875,867			11,089,257
Working capital (deficiency)		(283,034	)		9,837,211		10,069,216		(741,848	)		(738,833	)		(8,487,933	)		16,940,414
Stockholders’ equity (deficiency)		12,143,070			21,511,352		21,434,624		10,887,349			(653,875	)		7,134,150			19,995,582

COMPARATIVE HISTORICAL AND PRO FORMA PER SHARE DATA

The table sets forth for the periods indicated the following:


	•	the historical net loss and book value per share of JAG Media Common Stock for the fiscal years ended July 31, 2007, 2006, 2005, 2004 and 2003 and for the three months ended October 31, 2007;


	•	the historical net loss and book value per share of Cryptometrics Common Stock for the fiscal years ended April 30, 2007 (as restated), 2006 and 2005 and;


	•	pro forma loss before non-recurring charges and book value per share of JAG Media (to be renamed Cryptometrics, Inc.) as the holding company continuing after the Merger, as accounted for as a purchase by Cryptometrics of JAG Media, for the period presented.

JAG Media has not declared or paid cash dividends on JAG Media Common Stock. Cryptometrics has not declared or paid cash dividends on Cryptometrics Common Stock. Any future earnings are expected to be retained for use in the operations and expansion of Cryptometrics business. Neither JAG Media nor Cryptometrics anticipates paying any cash dividends in the foreseeable future.

The information presented in this table should be read in conjunction with the unaudited pro forma condensed consolidated financial information and the separate historical financial statements of JAG Media and Cryptometrics included elsewhere in this document.

JAG Media


	Year Ended			Year Ended			Year Ended			Year Ended			Year Ended			Three Months Ended
	July 31, 2007			July 31, 2006			July 31, 2005			July 31, 2004			July 31, 2003			October 31, 2007

Net income (loss) per Common Share	$	(0.25	)	$	(0.08	)	$	(0.04	)	$	(0.05	)	$	(0.07	)	$	0.03
Book value per Common Share	$	(0.30	)	$	(0.10	)	$	(0.03	)	$	0.01			—		$	(0.20	)

Cryptometrics


	Year Ended			Year Ended			Year Ended			Six Months Ended			Three Months Ended
	April 30, 2007			April 30, 2006			April 30, 2005			October 31, 2007			July 31, 2007
	(as restated)

Net loss per Common Share	$	(0.80	)	$	(0.61	)	$	(0.58	)	$	(0.44	)	$	(0.22	)
Book value per Common Share	$	1.01		$	1.79		$	2.45		$	0.59		$	0.79

Pro Forma — JAG Media (to be renamed Cryptometrics, Inc.),

as the holding company surviving the Merger


	Year Ended			Three Months Ended
	July 31, 2007			October 31, 2007
	(Unaudited)			(Unaudited)

Loss before non-recurring charges per Common Share*	$	(0.05	)	$	(0.01	)
Book value per Common Share	$	(0.01	)	$	(0.01	)

* See (a) and (i) in Note 2 to the pro forma financial statements

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

Each of JAG Media and Cryptometrics has made forward-looking statements in this Consent Solicitation/Prospectus and in other documents to which you are referred that are subject to risks and uncertainties. These forward-looking statements include information about possible or assumed future results of operations or the performance of the combined companies following the consummation of the Merger. When any of the words “believes,” “expects,” “anticipates,” “intends,” “estimates” or similar expressions are used, forward-looking statements are being made. Many possible events or factors could affect the actual financial results and performance of each of the companies before the Merger and of the combined company after the Merger, and these factors or events could cause those results or performance to differ significantly from those expressed in these forward-looking statements. Many of these risks and uncertainties are not within either company’s control and are set forth under “Risk Factors” at page 12. Possible events or factors include the following:


	•	revenues of both JAG Media and Cryptometrics after the Merger may be lower than currently expected for a variety of reasons including loss of personnel, changes in market conditions and responses by competitors;

	•	conducting the JAG Media and Cryptometrics businesses in the future may be more time consuming, costly and difficult than anticipated;

	•	competition in Cryptometrics’ industry is extremely intense and may increase;

	•	third parties may infringe Cryptometrics’ proprietary intellectual property rights;

	•	issues and difficulties that are faced in connection with the continued development and improvement of software;

	•	litigation involving matters such as intellectual property, securities, employees and customer issues may adversely affect the businesses of Cryptometrics and JAG Media;

	•	general economic conditions in the U.S. or abroad may change or be worse than currently expected; and

	•	changes may occur with respect to JAG Media’s stock price or in the securities markets in general.

Neither JAG Media nor Cryptometrics is undertaking any responsibility to release publicly any revisions to these forward-looking statements to take into account events or circumstances that occur after the date of this Consent Solicitation/Prospectus. Additionally, neither JAG Media nor Cryptometrics is undertaking any responsibility to update you on the occurrence of any unanticipated events which may cause actual results to differ from those expressed or implied by the forward-looking statements contained in this Consent Solicitation/Prospectus. You are cautioned not to place undue reliance on these statements, which speak only as of the date of this Consent Solicitation/Prospectus.

RISK FACTORS

The Merger proposed in the Merger Agreement poses a high degree of risk for both the stockholders of JAG Media and the stockholders of Cryptometrics. Before deciding whether to exchange their shares of Cryptometrics Common Stock for JAG Media Common Stock or perfect their appraisal rights, stockholders of Cryptometrics are urged to carefully consider the following.

RISKS RELATED TO JAG MEDIA’S BUSINESS

JAG MEDIA HAS A HISTORY OF LOSSES, ANTICIPATES LOSSES FOR THE FORESEEABLE FUTURE AND MAY NEVER ACHIEVE PROFITABILITY.

As of October 31, 2007, JAG Media had an accumulated deficit of $59,113,989. JAG Media may never achieve operating profitability. As a result, JAG Media believes that there is substantial doubt about its ability to continue as a going concern and its independent auditors included an explanatory paragraph to emphasize such doubt in their report on the audit of JAG Media’s financial statements included in this Consent Solicitation/Prospectus. JAG Media has made, and will continue to make, very significant expenditures well before its revenues increase sufficiently to cover these additional costs. JAG Media is not able to estimate when, if ever, its revenues will increase sufficiently to cover these costs. Internet users have only been attracted to subscription sites in limited areas. JAG Media subscription revenues are materially below its costs. JAG Media will continue to incur significant losses for the foreseeable future and cannot assure you that its revenue will grow in the future or that additional financing will be made available to it. Many dot-com companies have found it difficult to raise funds, and a number of such companies have gone bankrupt. If JAG Media requires additional funding and does not obtain it, JAG Media may be forced to restructure, file for bankruptcy or cease operations, any of which could cause you to lose all or part of your investment in JAG Media common stock.

JAG MEDIA WILL REQUIRE ADDITIONAL FUNDS TO MEET ITS CASH OPERATING EXPENSES AND ACHIEVE ITS CURRENT BUSINESS STRATEGY.

JAG Media will require more capital to meet its current operating expenses as well as any non-recurring costs or liabilities and to achieve its current business strategy. As JAG Media requires additional funds to sustain its operations as well as refocus its business and search for appropriate merger candidates it will have to seek additional equity or other financing. Such financing is very difficult for JAG Media to achieve and may not be available. Even if it is, it may be on terms that are materially adverse to your interests with respect to dilution of book value, dividend preferences, liquidation preferences, or other terms.

JAG Media cannot guarantee that it will be able to obtain additional financing as it needs it. When JAG Media operations require additional financing, if JAG Media is unable to obtain such financing on reasonable terms, JAG Media would be forced to restructure, file for bankruptcy or cease operations, any of which could cause you to lose all or part of your investment in JAG Media common stock.

JAG MEDIA HAS NO ARRANGEMENTS CURRENTLY IN EFFECT, SUCH AS THE EQUITY LINE IT HAS HISTORICALLY USED, TO PROVIDE IT WITH FUTURE LIQUIDITY.

As a condition of JAG Media financing in May 2006, JAG Media was required to cancel its existing equity line purchase agreement. Accordingly, JAG Media will not have access to its historical source of liquidity. As JAG Media anticipates that it will continue to have negative cash flow, the only foreseeable source of liquidity is through the sale of JAG Media equity. Without access to the readily available mechanism of an equity line, it will be more difficult and time consuming for JAG Media to arrange private placements or other sales of JAG Media common stock. If JAG Media is unable to raise money by selling JAG Media common stock through private placements or otherwise, it will be unable to meet its cash needs. If JAG Media is unable to meet its cash needs, JAG Media may be forced to restructure, file for bankruptcy or cease operations, any of which could cause you to lose all or part of your investment in JAG Media common stock.

JAG MEDIA MAY NOT BE ABLE TO STOP CONTRACTION OF JAG MEDIA SUBSCRIBER REVENUES AND ATTRACT SUFFICIENT INSTITUTIONAL CUSTOMERS.

JAG Media’s subscriber base has been shrinking and JAG Media has determined that it cannot expand its retail subscriber base for its traditional product. JAG Media believes that it must refocus its subscriber base on institutional customers to be successful, but does not currently have the funding to do so. JAG Media subscription revenues have leveled off at a level which cannot support its operating costs.

Although JAG Media would like to refocus its key subscriber base, its efforts have been ineffective. JAG Media’s competitors may be more successful than it is in attracting customers, or the number of institutional and other professional users seeking or willing to pay for financial information of the kind JAG Media provides may not increase or may even decrease. Any of these would adversely affect JAG Media. Because there is currently limited potential for Internet banner advertising revenues, if JAG Media cannot reverse the current shrinkage of its subscriber base or refocus such base, JAG Media will have little, if any, financial success.

JAG MEDIA HAS BEEN FORCED TO DISCONTINUE ITS COMMENTATORS AND THE FREE PORTION OF ITS WEBSITE WHICH MAY CAUSE JAG MEDIA TO LOSE SUBSCRIBERS.

In order to attempt to reduce costs, JAG Media has been forced to discontinue all its commentators as well as the entire free portion of its website. Accordingly, JAG Media runs the risk that existing and potential subscribers may not find the site valuable and its revenues may decline. Moreover, many of JAG Media’s competitors offer financial information for free and are likely to continue to do so, perhaps at an increasing rate. JAG Media’s current and potential subscribers may be unwilling to pay for its service if they feel they can receive comparable information for free.

JAG MEDIA HAS BEEN FORCED TO REDUCE ITS NUMBER OF EMPLOYEES WHICH MAY AFFECT THE QUALITY OF ITS REMAINING PRODUCTS AND CAUSE JAG MEDIA TO LOSE SUBSCRIBERS.

In order to attempt to reduce costs, JAG Media has been forced to reduce the number of its employees to two. In November 2005, JAG Media did not renew employment agreements with three of its employees. Additionally, one of JAG Media’s employees resigned in January 2006 and three more employees resigned in April 2007. Subsequently four more employees resigned. JAG Media does not intend to replace any of the foregoing employees. From November 2005 to date, the number of JAG Media employees has been reduced by approximately 85%. Accordingly, JAG Media runs the risk that the quality of its JAGNotes (Upgrade/Downgrade) Report and the Rumor Room products may be adversely affected. In such a case, existing and potential subscribers may not find its site valuable and JAG Media revenues may decline. Further development of its Pixaya products has already been indefinitely deferred, potential revenues will be delayed and may never be realized.

JAG MEDIA MAY NOT BE SUCCESSFUL IN ITS ATTEMPT TO REFOCUS ITS BUSINESS STRATEGY TO TARGET PRIMARILY SUBSCRIPTIONS BY INSTITUTIONAL INVESTORS FOR ITS TRADITIONAL PRODUCT.

JAG Media’s efforts to include individual retail subscribers as part of its strategy to increase sales of JAG Media’s flagship JagNotes Report have been unsuccessful, and JAG Media has therefore decided to refocus its strategy on offering subscriptions solely to institutional investors and professional traders. Due to the uncertain nature of this undertaking and JAG Media’s lack of funding, this shift in business strategy may not be executed, or if executed may not be successful, and JAG Media may not realize any benefit from it.

JAG MEDIA MAY NOT BE SUCCESSFUL AT BUILDING BRAND AWARENESS OR BUILDING STRATEGIC RELATIONSHIPS.

JAG Media’s growth and success depends in part on its ability to build awareness of the JAG Media name. The Company changed its name to JAG Media in April 2002 after operating for almost three years under the name JagNotes.com. The JAG Media name has only limited recognition within the financial community and little if any recognition among the general public. JAG Media does not currently allocate any of its working capital to marketing

and advertising the JAG Media name but rather relies solely upon strategic alliances to increase its name recognition. JAG Media’s ability to refocus its subscriber base, offer new services or otherwise expand the business will be limited if JAG Media cannot increase that name recognition. JAG Media cannot guarantee that it will be successful in doing so.

JAG MEDIA HAS NOT BEEN SUCCESSFUL IN SUFFICIENTLY REDUCING COSTS OR IN INCREASING REVENUES.

JAG Media’s costs continue to exceed its revenues, even though JAG Media believes it has reduced its costs as much as practically possible. At the same time, JAG Media revenues remain low. If such trends continue, JAG Media may be unable to meet its cash needs and it may be forced to restructure, file for bankruptcy or cease operations, any of which could cause you to lose all or part of your investment in JAG Media common stock.

JAG MEDIA MAY NOT BE ABLE TO FIND OR CONSUMMATE A SUITABLE MERGER OR ACQUISITION.

JAG Media is actively looking for merger or acquisition candidates that would be beneficial to it. Over the past few years, JAG Media has entered into negotiations with several companies, but was able to complete only one very small acquisition. JAG Media cannot assure you that it will be able to find or consummate a suitable merger or acquisition. The Merger Agreement may be terminated by either party at any time. Cryptometrics had revenues of $1,293,843, $215,661 and $681,854 for the fiscal years ended April 30, 2007, 2006 and 2005, respectively. Cryptometrics had losses of $11,113,200, $6,929,981 and $5,501,379 for the fiscal years ended April 30, 2007, 2006 and April 30, 2005, respectively. Even if JAG Media completes a merger or acquisition, the resulting business may not prove viable or result in losses. See “— Risks Related to the Proposed Merger and Cryptometrics’ Business.” JAG Media’s business will be adversely affected if it is unable to find suitable merger or acquisition candidates and complete a business combination.

JAG MEDIA MAY BE EFFECTIVELY ACQUIRED AND MANAGED BY A BUSINESS WITH NO EXPERIENCE IN ITS SECTOR.

In order to expand its business substantially, JAG Media may have to merge with a business very different from JAG Media’s current activities, but to do so, JAG Media may have to issue many more of its shares than are now outstanding. JAG Media shareholders would have their holdings greatly diluted by such a transaction. The Merger with Cryptometrics is such a transaction. In addition, the company with which JAG Media merged would be in control and may have no expertise permitting it to effectively manage JAG Media’s current business. If the Merger is consummated, Cryptometrics would be in control and it has no experience in JAG Media’s business. Alternatively, JAG Media may not be able to find or it may not select a target company with management who are able to manage effectively the newly combined business or their own business. If JAG Media is unable to operate the new combined businesses at a profit or if JAG Media incurred substantial costs in merging the businesses, either of such eventualities could materially and adversely affect JAG Media business, results of operation and financial condition, and could cause you to lose all or part of your investment in JAG Media common stock. See “— Risks Related to the Proposed Merger and Cryptometrics’ Business.”

JAG MEDIA MAY EXPERIENCE DIFFICULTIES IN DEVELOPING NEW AND ENHANCED SERVICES AND PRODUCTS.

JAG Media believes that its JAGNotes website will be more attractive to subscribers if JAG Media introduces additional or enhanced services in the future in order to retain its current users and attract new users. JAG Media’s first attempt to introduce streaming audio and video was not financially successful and the business was sold. JAG Media was considering various new enhanced services for its JAGNotes website, as well as new products for its Pixaya business unit, but adequate financing is not currently available.

In addition, even if it is able to obtain financing in the future, JAG Media may experience other difficulties that could delay or prevent it from introducing such enhanced services. JAG Media may encounter technological problems in enhancing its websites and developing new products or enhancements to current products in its Pixaya

business unit. JAG Media may need to modify significantly the design of these services on its websites and modify significantly (or discontinue, as JAG Media has already had to do) certain products and services being offered through its Pixaya business unit. JAG Media’s business could be adversely affected if it experiences difficulties in introducing or maintaining new services and products, if these new services and products are not accepted by users or if their cost exceeds the revenue they generate.

If JAG Media introduces enhanced service on its JAGNotes website that is not favorably received, its current users may not continue using its service as frequently. New users could also choose a competitive service over ours.

JAG MEDIA’S FAILURE TO RESPOND TO RAPID CHANGES IN TECHNOLOGY AND ITS APPLICATIONS AND INTENSE COMPETITION IN THE MOBILE SERVICES INDUSTRY PRODUCTS COULD MAKE JAG MEDIA SERVICES OBSOLETE.

If and when funds become available, JAG Media’s Pixaya business unit hopes again to develop software for the mobile phone and wireless environment. The mobile and wireless services industries are subject to rapid and substantial technological development and product innovations. To be successful, JAG Media must respond to new developments in technology and find new applications of existing technology in our Pixaya business unit for which JAG Media currently has no available funds. In addition, JAG Media’s response may be hindered if JAG Media requires, but cannot secure, rights to essential third party intellectual property. JAG Media would be competing against numerous companies offering alternative products and services, most of which have much greater financial, marketing and technical resources to utilize in pursuing technological development.

JAG MEDIA MAY NOT SUCCESSFULLY ATTRACT OR MANAGE STRATEGIC ALLIANCES.

JAG Media currently intends to evaluate strategic alliances, partnerships or joint ventures, as a means of acquiring additional distribution. Pursuing such transactions will entail a number of risks and difficulties, including a continuing lack of available funds and personnel. JAG Media competes with a wide variety of information providers and there is substantial competition for distribution channels. JAG Media can offer no guarantee that it will be able to locate suitable candidates for alliances or risk sharing partners. If JAG Media is able to do so, it will require a high level of managerial skill to successfully evaluate and implement these transactions. While JAG Media has limited experience in evaluating and implementing transactions of this type, JAG Media cannot guarantee that it will be able to successfully pursue this strategy.

JAG MEDIA MAY HAVE TO DEFEND AGAINST INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS AND LIBEL AND DEFAMATION CLAIMS, WHICH MAY CAUSE SIGNIFICANT OPERATIONAL EXPENDITURES.

Parties may assert claims against JAG Media that it has violated a patent or infringed a copyright, trademark or other proprietary right belonging to them. Parties could also bring libel, defamation or similar claims based on the content published on JAG Media’s websites. Any such claims, whether meritorious or not, could result in the expenditure of significant financial and managerial resources on JAG Media’s part, which could materially adversely affect its business, results of operations and financial condition, and your investment in JAG Media could be adversely affected.

FAILURE TO MAINTAIN JAG MEDIA’S REPUTATION FOR TRUSTWORTHINESS MAY REDUCE THE NUMBER OF ITS USERS, WHICH MAY HARM JAG MEDIA’S BUSINESS.

It is very important that JAG Media maintain its reputation as a trustworthy provider of financial news. The occurrence of events, including JAG Media’s misreporting a news story, could harm its reputation for trustworthiness. These events could result in a significant reduction in the number of its subscribers, which could materially adversely affect its business, results of operations and financial condition, and your investment in JAG Media could be adversely affected.

JAG MEDIA DEPENDS ON KEY PEOPLE IN MANAGEMENT AND OPERATIONS.

JAG Media depends on its key employees’ contacts within the professional financial community for certain information that it provide to its subscribers. Accordingly, JAG Media will be largely dependent on its ability to retain its two current employees, Mr. Thomas J. Mazzarisi, its Chairman, Chief Executive Officer and General Counsel, and Mr. Stephen J. Schoepfer, its President, Chief Operating Officer, Chief Financial Officer and Secretary. JAG Media may also need to attract and retain additional qualified officers, software developers and other key personnel in the future in order to successfully manage its new strategy. JAG Media may not be able to attract or retain the requisite personnel and does not currently have the requisite funding to hire them. If JAG Media loses the services of either of its key personnel or is unable to attract, hire, train and retain qualified officers, software developers and other key personnel, its business, and your investment in JAG Media could be adversely affected.

CERTAIN TERMS OF THE EMPLOYMENT AGREEMENTS OF JAG MEDIA’S EXECUTIVE OFFICERS COULD DISCOURAGE A POTENTIAL TAKEOVER OF JAG MEDIA BY A THIRD PARTY.

Pursuant to the amended and restated employment agreements of Thomas J. Mazzarisi, JAG Media’s Chairman, Chief Executive Officer and General Counsel, and Stephen J. Schoepfer, JAG Media’s President, Chief Operating Officer, Chief Financial Officer and Secretary, each executive may resign upon a change-in-control of JAG Media. A “change in control” shall be deemed to have occurred if, among other things, there is an acquisition of 30% or more of JAG Media then outstanding shares of common stock. If such executive opts to resign from his position at JAG Media, he shall be entitled to receive (i) continued medical and life insurance coverage for a severance period equal to the greater of one year or the number of years and fractions thereof between the date of such termination and the end of the term, (ii) a lump sum cash payment equal to the executive’s highest rate of annual salary in effect during the term multiplied by the severance period, (iii) a lump sum cash payment equal to the number of accrued and unused vacation days calculated at the executive’s then current salary rate and (iv) accelerated vesting of all of the executive’s outstanding stock options. Furthermore, immediately prior to a change-in-control, each of Messrs. Mazzarisi and Schoepfer shall also be granted an option to acquire 1,000,000 shares (reduced to 750,000 shares in connection with the Merger) of JAG Media common stock at an exercise price equal to the fair market value of the stock prior to such change in control, which option shall be fully vested and immediately exercisable in full and expire on a date which is the earlier of ten years from such change in control and three years after termination of employment. Any or all of these provisions may have the effect of preventing or discouraging an attempt by a party to take over or otherwise gain control of JAG Media or reduce the price which such a party is willing to pay for JAG Media.

JAG MEDIA MAY FACE DIFFICULTIES CONCERNING CONTINUED AVAILABILITY OF ITS SOURCES OF INFORMATION FOR ITS PRODUCTS.

JAG Media’s JAGNotes and Rumor Room products rely on information from independent third party sources. JAG Media does not maintain written agreements with these sources to provide this information, so JAG Media cannot guarantee that any of these sources will continue to provide the information necessary to maintain these products on its site. If information from these sources is altered, curtailed or discontinued this could adversely affect the quality or even the viability of these products. This, in turn, could decrease the demand for its site and revenues.

JAG MEDIA MAY BECOME A PARTY TO VARIOUS LEGAL PROCEEDINGS RELATING TO THE DISSEMINATION OF RUMORS AND OTHER INFORMATION OF QUESTIONABLE RELIABILITY.

Information posted in the Rumor Room consists of rumors and other information received from third party sources that may have no reasonable factual basis. JAG Media realizes that rumors are inherently unreliable, and it provides a cautionary note on this portion of its site reminding subscribers that cyberfraud is prevalent and that rumors should not be relied upon when making investment decisions. There can be no assurance that JAG Media will be able to prevent the unlawful posting of misleading, fraudulent or intentionally erroneous information, however, and the law relating to its potential liability relating to such activity is currently unsettled. The potential imposition of liability for unlawful activities of subscribers to its site could require JAG Media to implement measures to reduce its exposure to such liability, which may require JAG Media, among other things, to spend

substantial resources and/or to discontinue certain service offerings. In addition, it is possible that JAG Media could become subject to various legal proceedings alleging, among other things, that it has intentionally disseminated or has aided and abetted others in intentionally disseminating false information. These claims, even without merit, could cause JAG Media to expend significant financial and managerial resources, which could adversely affect JAG Media business operations.

THE UNCERTAINTY OF FUTURE GOVERNMENT REGULATION OF THE INTERNET MAY ADD TO JAG MEDIA’S OPERATING COSTS.

Like many businesses engaging in Internet-related activities, JAG Media may face unanticipated operating costs because of the current uncertainty surrounding potential government regulation of the Internet and e-commerce. JAG Media believes that it is not currently subject to direct regulation of online commerce, other than regulations applicable to businesses generally. However, the Internet has rapidly emerged as a commerce medium, and governmental agencies have not yet been able to adapt all existing regulations to the Internet environment. Laws and regulations may be introduced and court decisions reached that affect the Internet or other online services, covering issues such as user pricing, user privacy, freedom of expression, access charges, content and quality of products and services, advertising, intellectual property rights and information security. For example, if the government determines that JAG Media’s website and the types of activities engaged in by visitors and/or subscribers to JAG Media’s website should be subject to new or existing rules or regulations, JAG Media’s business model may be adversely affected and JAG Media’s operating costs may increase. In addition, as an Internet company it is unclear in which jurisdictions JAG Media is actually conducting business. JAG Media’s failure to qualify to do business in a jurisdiction that requires it to do so could subject JAG Media to fines or penalties and could result in its inability to enforce contracts in that jurisdiction. Even if JAG Media were able to ascertain correctly in which jurisdictions it conducts business, many of these jurisdictions have yet to determine the application of their existing laws to Internet-related activities or develop laws that apply to such activities.

JAG MEDIA COULD BE DEEMED TO BE AN INVESTMENT ADVISER SUBJECT TO FEDERAL OR STATE REGULATORY OVERSIGHT.

Companies and individuals that provide financial advice to investors in the United States are generally required to register as an investment adviser at either the federal or state level, and are subject to extensive regulation. JAG Media believes that its business consists of a publishing activity for which investment adviser registration and regulation do not apply under applicable federal or state law, and it does not believe that it is required to register as an investment adviser with either the SEC or any of the various states. The regulatory environment in which JAG Media operates is subject to change, however, and JAG Media could be required to register as an investment adviser with an appropriate regulatory agency at some point in the future. Such registration could adversely affect JAG Media’s method of operation and revenues. For example, if JAG Media were ever deemed to be in non-compliance with applicable investment adviser regulations, JAG Media could be subject to various penalties, including administrative or judicial proceedings that might result in censure, fine, civil penalties (including treble damages in the case of insider trading violations), the issuance of cease-and-desist orders or other adverse consequences.

RISKS RELATED TO JAG MEDIA’S INDUSTRY

JAG MEDIA’S BUSINESS IS CURRENTLY DEPENDENT ON THE CONTINUED PUBLIC INTEREST IN THE STOCK MARKET.

The volatility of the stock market in the 1990s generated unprecedented public interest in the stock market and trading. JAG Media’s success depends upon the continued maintenance or growth of this interest. The subsequent downturn in the stock market may have been in part responsible for an overall decrease in subscription revenues since the end of JAG Media’s second fiscal quarter of 2001. Even though the market has recovered to some extent, JAG Media’s revenues have generally continued to decline. A number of factors that are out of JAG Media’s control could lead to a stagnate or depressed stock market which would likely decrease the public’s interest in stock trading and financial information. If this were to happen, it is likely that JAG Media would lose a significant percentage of its then current and potential subscriber base.

JAG MEDIA STOCK — AND TECHNOLOGY AND INTERNET STOCKS GENERALLY — HAVE BEEN AND MAY CONTINUE TO BE VOLATILE.

The market for JAG Media stock has been and is likely to continue to be highly volatile and subject to wide price and volume fluctuations. These variations are the result of many factors, most of which are beyond its control. Furthermore, Internet and technology related stocks generally have been subject to wide fluctuations in price and volume that often appear to be unrelated to the operating results of these companies. The burst of the dot-com bubble and continued volatility of the stock market has made it difficult for many dot-com companies to raise funds, and a number of such companies have gone bankrupt. Such volatility can present risks for investors. Moreover, such volatility often leads to securities litigation brought by investors who are seeking to recoup losses resulting from rapid and significant drops in price and/or volume. While JAG Media is not aware of any pending or threatened suit or basis therefor, such suits are costly and it could be adversely affected if such a suit were brought against it.

MOST OF JAG MEDIA’S CURRENT AND POTENTIAL COMPETITORS HAVE GREATER NAME RECOGNITION, FINANCIAL, TECHNICAL AND MARKETING RESOURCES, AND MORE EXTENSIVE CUSTOMER BASES AND INDUSTRY RELATIONSHIPS THAN JAG MEDIA DOES, ALL OF WHICH COULD BE LEVERAGED TO GAIN MARKET SHARE TO JAG MEDIA’S DETRIMENT.

JAG Media’s website’s primary current competitors provide financial news, commentary and analysis on the Internet such as Yahoo Finance, Marketwatch, TheStreet.com, Briefing.com, America Online Personal Finance, Reuters and MotleyFool.com. Providing financial information and analysis over the Internet is an intensely competitive business. An increasing number of web-based financial information providers are competing for subscribers, customers, advertisers, content providers, analysts, commentators and staff, and JAG Media continues to face competition from traditional news and information sources including television and print. JAG Media expects competition from both sources to intensify and increase in the future. Many such competitors have substantially greater financial and other resources than JAG Media.

JAG Media major competitors currently include:


	•	Online financial news and information providers including Yahoo Finance, Marketwatch, TheStreet.com, Briefing.com, America Online Personal Finance, Reuters and MotleyFool.com;

	•	Internet portals and search engines such as America Online, MSN and Yahoo;

	•	Traditional media sources such as The Wall Street Journal, Investor’s Business Daily, The Financial Times, Barrons, CNN/Money, and MSN Money/CNBC, all of whom also have an Internet presence;

	•	Terminal-based financial news providers including Bloomberg, Reuters and Dow Jones; and

	•	Online brokerage firms such as TD Ameritrade, E*Trade Financial, Charles Schwab and Fidelity.

JAG MEDIA IS IN AN INTENSELY COMPETITIVE BUSINESS WITH LOW BARRIERS TO ENTRY.

The barriers to entry into JAG Media’s business are relatively low — i.e., it is not difficult for new competitors to enter the market. Many blogs now provide financial information at no cost. Much of the information JAG Media provides to subscribers is available and JAG Media does not have any patented or otherwise protected technologies that would preclude or inhibit competitors from entering JAG Media’s markets. JAG Media’s current and future competitors may develop or offer services that have significant price, substantive, creative or other advantages over the services JAG Media provides. If they do so and JAG Media is unable to respond satisfactorily, its business and financial condition will likely be adversely affected.

JAG MEDIA MAY NOT BE ABLE TO ADEQUATELY PROTECT ITSELF AGAINST SECURITY RISKS.

All Internet businesses are subject to electronic and computer security risks. JAG Media has taken steps to protect itself from unauthorized access to its systems and use of its site, but JAG Media cannot guarantee that these measures will be effective. If JAG Media security measures are ineffective, unauthorized parties could alter, misappropriate, or otherwise disrupt JAG Media service or information. If such unauthorized parties were able to

access certain of JAG Media’s, or JAG Media customers’, proprietary information, including subscribers’ credit card numbers, JAG Media would face significant unexpected costs and a risk of material loss, either of which could adversely affect JAG Media’s business.

RISKS RELATED TO JAG MEDIA’S CAPITAL STRUCTURE

SHAREHOLDERS MAY EXPERIENCE SIGNIFICANT DILUTION FROM THE EXERCISE OF THE WARRANTS TO PURCHASE JAG MEDIA COMMON STOCK.

JAG Media issued warrants to purchase 12,000,000 shares of its common stock to YA Global, of which warrants to purchase 700,000 shares have been exercised. The initial conversion price of such warrants is as follows: $.40 per share for 1,300,000 shares, $.50 per share for 2,000,000 shares, $.60 per share for 2,000,000 shares, $.70 per share for 3,000,000 shares, and $.80 per share for 3,000,000 shares. All such warrants expire in May, 2011. The specified exercise price of each warrant can be further reduced by adjustments upon the occurrence of various corporate transactions, including any issuance of shares of JAG Media common stock for a price less than the relevant warrant price, in which event such lower issue price shall become the new warrant exercise price and the number of shares issuable upon exercise of the warrant shall be proportionately increased.

Accordingly, because of the adjustment features of the exercise price of the warrants and the number of JAG Media shares of common stock purchasable on exercise of the warrants, you may experience substantial dilution upon exercise of the warrants. In addition, you may experience substantial dilution if the price of shares of JAG Media common stock increases to a level greater than the adjusted exercise prices.

JAG MEDIA HAS LIMITED CASH RESOURCES WHICH EXPOSES JAG MEDIA TO CLAIMS.

As of October 31, 2007, JAG Media had approximately $138,000 in cash and a working capital deficiency of $9,550,000. Such low levels of cash restrict JAG Media’s ability to operate and expose it to claims and lawsuits whatever the merits of such claims may be. If a claim or lawsuit is pursued against JAG Media and JAG Media does not have adequate cash at the time to defend against it, JAG Media may be forced to restructure, file for bankruptcy or cease operations, any of which could cause you to lose all or part of your investment in JAG Media’s common stock.

THE MARKET FOR JAG MEDIA’S STOCK IS LIMITED.

JAG Media’s common stock is traded on the Pink Sheets. Trading activity in JAG Media’s stock has fluctuated and at times been limited. JAG Media cannot guarantee that a consistently active trading market for JAG Media stock will continue, especially while JAG Media remains on the Pink Sheets.

THE RESALE BY YA GLOBAL OF JAG MEDIA’S SHARES MAY LOWER THE MARKET PRICE OF JAG MEDIA’S COMMON STOCK.

The resale by YA Global of JAG Media’s shares of common stock that it has received from JAG Media on conversion of the convertible debentures and on exercise of the warrants, as well as such shares it may receive upon future warrant exercises, will increase the number of JAG Media publicly traded shares, which could lower the market price of JAG Media’s common stock. Moreover, the shares that JAG Media issues to YA Global, or such other holders, will be available for immediate resale. There are no contractual restrictions on the ability of YA Global to offer shares issued to it pursuant to JAG Media’s convertible debentures and warrants, other than the limitation that YA Global cannot beneficially own more than 9.99% of JAG Media’s then outstanding shares of common stock. However, YA Global can waive such limitation and can then receive and dispose of shares as often and as quickly as it wishes to do so. If YA Global continues to immediately resell such shares, the market price for JAG Media’s shares could decrease significantly and you could experience significant dilution. In addition, the mere prospect of such transactions could lower the market price for JAG Media’s common stock.

Because YA Global is acquiring JAG Media’s shares at a discount, it will have an incentive to sell immediately so that it can realize a gain on the difference. In addition, the perceived risk of dilution and the resulting downward pressure on JAG Media’s stock price could encourage third parties to engage in short sales of JAG Media’s common

stock. By increasing the number of shares offered for sale, material amounts of short selling could further contribute to progressive price declines in JAG Media’s common stock. These factors could also make it more difficult for JAG Media to raise funds through future offerings of common stock.

A LARGE PERCENTAGE OF JAG MEDIA’S STOCK COULD BE OWNED BY YA GLOBAL.

YA Global could beneficially own up to 9.99% of shares of JAG Media’s common stock, or at present almost 5,850,000 shares of JAG Media’s issued and outstanding common stock. However, YA Global can waive such limit. On January 31, 2008, YA Global owned 5,548,170 shares and has a further right to purchase at various future dates up to an additional 11,300,000 shares of JAG Media common stock upon exercise of warrants. For example, were YA Global to own all such shares, it would own approximately 16,848,170 shares which would represent approximately 24% of JAG Media’s outstanding shares. If all or most of these shares, or even more shares, are issued to, and held by, YA Global, it could be able to control the disposition of any matter submitted to a vote of stockholders. This concentration of ownership may also have the effect of delaying or preventing a change of control of JAG Media. In addition, if YA Global chooses to sell a substantial number of shares of JAG Media’s common stock in the public market at or about the same time, such sales could cause the market price of JAG Media’s common stock to decline. In addition, the sale of these shares could impair JAG Media’s ability to raise capital through the sale of additional stock.

BECAUSE JAG MEDIA’S STOCK CURRENTLY TRADES BELOW $5.00 PER SHARE, AND IS QUOTED ON THE PINK SHEETS, JAG MEDIA’S STOCK IS CONSIDERED BY THE SEC A “PENNY STOCK,” WHICH CAN ADVERSELY AFFECT ITS LIQUIDITY.

JAG Media’s common stock does not currently qualify for listing on the Nasdaq Capital Market, and JAG Media does not anticipate that it will qualify for such a listing in the foreseeable future in the absence of a significant merger or acquisition. If JAG Media’s common stock continues to be quoted on the Pink Sheets or Nasdaq OTC Bulletin Board, and if the trading price of JAG Media’s common stock remains less than $5.00 per share, JAG Media’s common stock is considered a “penny stock,” and trading in JAG Media’s common stock is subject to the requirements of Rule 15g-9 under the Securities Exchange Act of 1934. Under this rule, brokers or dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements. The broker or dealer must make an individualized written suitability determination for the purchaser and receive the purchaser’s written consent prior to the transaction. SEC regulations also require additional disclosure in connection with any trades involving a penny stock, including the delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and its associated risks. These requirements could severely limit the liquidity of such securities in the secondary market because few brokers or dealers are likely to undertake these compliance activities. In addition to the applicability of the penny stock rules, another risk associated with trading in penny stocks may be large price fluctuations.

JAG MEDIA’S AMENDED CHARTER CONTAINS PROVISIONS WHICH MAY DISCOURAGE AN UNAFFILIATED PARTY TO TAKE JAG MEDIA OVER.

On April 26, 2006, JAG Media increased its authorized common stock by 250 million additional shares of stock. Without further stockholder action, the Board of Directors of JAG Media could authorize the issuance of about 400,000,000 shares of common stock as well as preferred stock with special voting rights by class or with more than one vote per share, to a “white knight” in order to deter a potential buyer of JAG Media. This might have the effect of preventing or discouraging an attempt by a party unable to obtain the approval of the Board of Directors of JAG Media to take over or otherwise gain control of JAG Media.

YOUR OWNERSHIP OF SHARES IN JAG MEDIA COULD BE IN DOUBT DUE TO POSSIBLE NAKED SHORTING OF JAG MEDIA COMMON STOCK.

JAG Media’s Board of Directors believes, but cannot confirm, that speculators may have engaged in a practice commonly known as a “naked short” sale of JAG Media’s stock, which means that certain brokers may be permitting their short selling customers to sell shares of JAG Media’s stock that their customers do not own and may have failed to borrow and therefore deliver the shares sold to the purchaser of the shares. JAG Media has from time

to time been included by Nasdaq on the Regulation SHO Threshold Security List which is indicative of a significant amount of naked shorting in the stock. Because naked shorting may result in an artificial depression of JAG Media’s stock price, you could lose all or part of your investment in JAG Media’s common stock. As a result of this naked short selling, there may be a substantial number of purchasers who believe they are stockholders of JAG Media but who in fact would not be stockholders since their brokers may never have received any shares of JAG Media for their account. In addition, investors who believe they are stockholders may not have received JAG Media’s stock dividend to which they are entitled or may have been deprived of the right to vote some or all of their shares.

RISKS RELATED TO THE PROPOSED MERGER AND CRYPTOMETRICS’ BUSINESS.

There is no assurance that the proposed Merger between JAG Media and Cryptometrics will ever be consummated or if it is consummated, that it will be pursuant to the terms set forth in the Merger Agreement. In addition to the risks relating to the businesses of JAG Media which are described above, you should carefully consider the following risk factors relating to the possible Merger.

MOST CRYPTOMETRICS STOCKHOLDERS WILL NOT KNOW THE VALUE OR THE AMOUNT OF THE JAG MEDIA COMMON STOCK THAT THEY WILL RECEIVE IN CONNECTION WITH THE MERGER UNTIL AFTER THE MERGER HAS BEEN CONSUMMATED.

Holders of Cryptometrics Common Stock will in general receive shares of JAG Media Common Stock in proportion to their holdings of Cryptometrics Common Stock compared to all outstanding shares of Cryptometrics Common Stock at the time of the Merger, subject to certain adjustments. A limited number of Cryptometrics stockholders holding 779,750 shares of Cryptometrics Common Stock, by virtue of subscription agreements with Cryptometrics, will receive a greater or lesser number of JAG Media shares. They will be entitled to own post Merger shares of JAG Media Common Stock having an aggregate fixed market value, based on the opening price of such stock after the Merger on the OTC Bulletin Board or Pink Sheets, of $15,516,250, equal to 200% (in the case of 769,250 such shares) or 125% (in the case of 10,500 such shares) of the amount for which they acquired their Cryptometrics Common Stock, which in each case was $10.00 per share. The aggregate number of shares of JAG Media Common Stock remaining for other stockholders of Cryptometrics will then be shared by such other stockholders pro rata to the number of shares held by each compared to the aggregate number shares of Cryptometrics Common Stock held by all of such other stockholders. Accordingly, the amount and the value of JAG Media Common Stock to be received by such other holders of Cryptometrics Common Stock will not be determinable until after the Merger has been consummated.

OFFICERS AND DIRECTORS HAVE POTENTIAL CONFLICTS OF INTEREST IN THE MERGER.

In considering the recommendations of the JAG Media and Cryptometrics Boards of Directors that the stockholders approve the Merger, you should be aware that some of the directors and officers of each company may have interests in the Merger different from, or in addition to, yours. For example, if the Merger is completed, the existing directors and executive officers of Cryptometrics will become the directors and senior management of JAG Media (to be renamed “Cryptometrics, Inc.”).

MANAGEMENT OF THE BUSINESS AFTER THE MERGER.

In accordance with the terms of the Merger Agreement, the directors and executive officers of Cryptometrics will become the directors and executive officers of JAG Media (to be renamed “Cryptometrics, Inc.”). The new directors and executive officers of JAG Media may not have the expertise or capacity to effectively manage the JAG Media business or the combined businesses after the Merger. If they are unable to operate the new combined businesses at a profit or if substantial costs are incurred in managing the merging of the businesses, either of such eventualities could materially and adversely affect JAG Media’s business, results of operations and financial condition, and could cause you to lose all or part of your investment in JAG Media common stock.

CRYPTOMETRICS’ STOCKHOLDERS WILL EXERCISE SIGNIFICANT CONTROL OVER JAG MEDIA AS A RESULT OF THE MERGER.

After the Merger, under the current terms of the Merger Agreement, as amended, Cryptometrics’ stockholders just prior to the Merger will own approximately 87% of the outstanding common stock of JAG Media just after the Merger. As a result, the stockholders of Cryptometrics will have the ability to control JAG Media. Two Cryptometrics shareholders, who will also become the Co-Chief Executive Officers of JAG Media after the Merger, will own controlling blocks of shares of JAG Media common stock giving them extensive control and direction of all aspects of JAG Media’s strategy and businesses.

FUTURE ISSUANCES OF JAG MEDIA’S COMMON STOCK COULD DILUTE CURRENT STOCKHOLDERS OR ADVERSELY AFFECT THE MARKET.

Future issuances of JAG Media’s common stock after the Merger could be at values substantially below the price paid by the current holders of JAG Media’s common stock or those Cryptometrics stockholders who will exchange their shares of Cryptometrics common stock for JAG Media common stock in connection with the Merger. JAG Media anticipates that the shares of its common stock will be issued to pay off the principal and interest of its outstanding indebtedness and additional shares may be issued to raise cash. In addition, common stock could be issued to fend off unwanted tender offers or hostile takeovers without further stockholder approval. Future sales of JAG Media’s common stock, whether upon original issuance or by current stockholders or persons acquiring JAG Media’s common stock upon the exercise of convertible debentures, warrants or stock options, or upon the conversion of any newly authorized convertible preferred stock or to pay off JAG Media’s convertible debentures may depress the market price for JAG Media common stock.

Sales of substantial amounts of JAG Media’s common stock in the public market, or even just the prospect of such sales, could depress the prevailing market price of JAG Media’s common stock and its ability to raise equity capital in the future.

CRYPTOMETRICS HAS A HISTORY OF LOSSES AND ANTICIPATES THAT IT WILL INCUR CONTINUED LOSSES FOR THE FORESEEABLE FUTURE. CRYPTOMETRICS DOES NOT HAVE A SIGNIFICANT SOURCE OF REVENUE AND MAY NEVER GENERATE AN OPERATING PROFIT.

As of April 30, 2007, Cryptometrics’ accumulated deficit (as restated) was approximately $26,396,563. Cryptometrics revenues for its fiscal years ended April 30, 2007 and 2006 were $1,293,843 and $215,661 respectively. Cryptometrics expects to incur operating losses for the foreseeable future. Cryptometrics may never generate an operating profit or, even if Cryptometrics does become profitable from operations at some point, it may be unable to sustain that profitability.

CRYPTOMETRICS MAY REQUIRE ADDITIONAL CAPITAL FOR ITS OPERATIONS AND OBLIGATIONS, WHICH IT MAY NOT BE ABLE TO RAISE OR, EVEN IT IF DOES, COULD HAVE DILUTIVE AND OTHER NEGATIVE EFFECTS ON IT STOCKHOLDERS.

Any projection of future long-term cash needs and cash flows are inherently subject to substantial uncertainty. There is no assurance that Cryptometrics’ current level of liquid assets will be sufficient for anticipated or unanticipated working capital and capital expenditure requirements during the next 12 months. Cryptometrics may need, or find it advantageous, to raise additional funds in the future to fund Cryptometrics’ growth, pursue sales opportunities, develop new or enhanced products and services, respond to competitive pressures or acquire complementary businesses, technologies or services.

If Cryptometrics raises additional funds through the issuance of equity or convertible debt securities, the percentage ownership of Cryptometrics’ stockholders will be reduced and stockholders will experience additional dilution. These new securities may also have powers, preferences and rights that are senior to those of the rights of Cryptometrics’ common stock. Cryptometrics cannot be certain that additional financing will be available on terms favorable to it, if at all. If adequate funds are not available or not available on acceptable terms, Cryptometrics may be unable to fund its operations adequately, take advantage of acquisition opportunities, develop or enhance

products or services or respond to competitive pressures. Any inability to do so may require Cryptometrics to delay or abandon some or all of its development and expansion plans and may threaten Cryptometrics’ ability to continue business operations.

CRYPTOMETRICS’ MARKETS ARE EVOLVING AND CHARACTERIZED BY RAPID TECHNOLOGICAL CHANGE, WHICH IT MAY NOT BE ABLE TO KEEP PACE WITH.

The markets for Cryptometrics’ products and services are evolving and characterized by rapid technological change, changing customer needs, evolving industry standards and frequent new product and service announcements. The introduction of products employing new technologies and emerging industry standards could render Cryptometrics’ existing products or services obsolete or unmarketable. If Cryptometrics is unable to respond to these developments successfully or does not respond in a cost-effective way, its business, financial condition and operating results will suffer. To be successful, Cryptometrics must continually improve and enhance its products and service offerings and introduce and deliver new product and service offerings and improvement to existing products and services. Cryptometrics may fail to improve or enhance its products and services or introduce and deliver new products or services on a timely and cost-effective basis or at all. If Cryptometrics experiences delays in the future with respect to its products or services, it could experience a loss of revenues and customer dissatisfaction.

CRYPTOMETRICS’ SUCCESS DEPENDS ON ITS KEY PERSONNEL WHOM IT MAY NOT BE ABLE TO RETAIN, AND IT MAY NOT BE ABLE TO RECRUIT ADDITIONAL QUALIFIED PERSONNEL TO MEET ITS NEEDS, WHICH WOULD HARM ITS BUSINESS.

Cryptometrics believes that its success depends on the continued employment of its senior management team, including Robert Barra, its Co-Chairman and Co-Chief Executive Officer; Michael A. Vitale, its Co-Chairman and Co-Chief Executive Officer; Joel Shaw, its Chief Strategy Officer; and Dario Berini its Senior Vice President of Operations and Sales. If one or more of these executive officers were unable or unwilling to continue in their present positions, Cryptometrics’ business, financial condition and operating results could be materially adversely affected.

Cryptometrics’ success also depends on having a highly trained technical staff of software and hardware experts. Cryptometrics will need to continue to hire personnel with the skill sets necessary to develop new applications for its software and hardware and to adapt its products and services to the needs of its potential clients. Competition for personnel, particularly for employees with technical expertise, is intense. Experienced software and hardware and technical experts often command sizeable compensation packages, including signing bonuses and stock options. A shortage in the number of trained technical personnel could limit Cryptometrics’ ability to design, develop and implement its products, increase sales of its existing products and services and make new sales as it offers new products and services. Ultimately, if Cryptometrics’ cannot hire and retain suitable personnel, or if it is unable to hire such persons on satisfactory financial terms, Cryptometrics’ business, financial condition and operating results will be impaired.

CRYPTOMETRICS DEPENDS ON A LIMITED NUMBER OF CUSTOMERS FOR A SUBSTANTIAL PORTION OF ITS REVENUES. THE LOSS OF ANY KEY CUSTOMER WITHOUT REPLACEMENT COULD SUBSTANTIALLY REDUCE CRYPTOMETRICS’ FUTURE REVENUES.

During the fiscal years ended April 30, 2007 and 2006, Cryptometrics’ revenues were largely derived from one key customer accounting for approximately 85% of its revenue and two key customers accounting for approximately 56% and 40% of its revenues, respectively. The inability to replace these customers with equally important new customers could substantially reduce Cryptometrics’ future revenues and result in a material adverse effect on its business.

CRYPTOMETRICS DEPENDS ON APPLICATIONS AND PROPRIETARY RIGHTS, WHICH MAY OFFER ONLY LIMITED PROTECTION AGAINST POTENTIAL INFRINGEMENT. IF CRYPTOMETRICS IS UNABLE TO PROTECT ITS PATENTS AND PROPRIETARY RIGHTS, ITS BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS WILL BE HARMED.

Cryptometrics has two patents, one in the European Union and one in New Zealand. Cryptometrics has seven pending U.S. and foreign patent applications, including a provisional application, relating to its face biometrics technologies. Cryptometrics has six pending U.S. and foreign patents relating to its communication and fingerprint biometrics technology. There can be no assurance that its pending claims will result in issued patents. Even if the most important of Cryptometrics’ claims are eventually protected by issued patents, its industry has been characterized by enormous technological innovation whereby its patents could well be rendered obsolete. Cryptometrics’ ability to compete and to grow its business could suffer if its intellectual property rights are not adequately protected. There can be no assurance that its patents and patent applications will result in patents being issued or that current or additional patents will afford protection against competitors. Cryptometrics also relies on trade secrets that are not patented. No guarantee can be given that others will not independently develop substantially equivalent proprietary information or techniques, or otherwise gain access to Cryptometrics proprietary technology.

CRYPTOMETRICS MAY FACE INTELLECTUAL PROPERTY INFRINGEMENT OR OTHER CLAIMS AGAINST IT OR ITS CUSTOMERS THAT COULD BE COSTLY TO DEFEND AND RESULT IN LOSS OF SIGNIFICANT RIGHTS.

Cryptometrics has not conducted any patent or technology searches and there may be other technology which infringes upon its technology or which it may be infringing upon. A patent search will not disclose unpublished applications that are currently pending in the United States Patent Office, and there may be one or more such unpublished pending applications that would take precedence over Cryptometrics’ applications. Even if Cryptometrics were to be granted patent protection for some or all of its technology, there can be no assurance that these patents will afford Cryptometrics any meaningful protection. Cryptometrics intends to rely primarily on a combination of trade secrets, technical measures, copyright protection and nondisclosure agreements with its employees to establish and protect the ideas, concepts and documentation of software and trade secrets developed by Cryptometrics. Such methods may not afford complete protection, and there can be no assurance that third parties will not independently develop such technology or obtain access to the software Cryptometrics has developed. Although Cryptometrics believes that use of the technology and products it has developed and other trade secrets used in its operations does not infringe upon the rights of others, its use of the technology and trade secrets Cryptometrics develops may infringe upon the patents or intellectual property rights of others. In the event of infringement, Cryptometrics could, under certain circumstances, be required to obtain a license or modify aspects of the technology and trade secrets it developed or refrain from using same. Cryptometrics may not have the necessary financial resources to defend any infringement claim made against it or be able to successfully terminate any infringement in a timely manner, upon acceptable terms and conditions or at all. Failure to do any of the foregoing could have a material adverse effect on Cryptometrics. Moreover, if the patents, technology or trade secrets Cryptometrics developed or uses in its business is deemed to infringe upon the rights of others, Cryptometrics could, under certain circumstances, become liable for damages, which could have a material adverse effect on Cryptometrics. As Cryptometrics continues to market its products, it may encounter patent barriers that are not known today.

Furthermore, since the date of invention (and not the date of application) governs under U.S. patent law, future applications could be filed by another party, which would preempt its position. While Cryptometrics has taken and continues to take steps to become aware of related technical developments, there can be no assurance that Cryptometrics will not encounter an unfavorable patent situation. Other parties may assert intellectual property infringement claims against Cryptometrics or its customers, and its products may infringe the intellectual property rights of third parties. If Cryptometrics becomes involved in litigation, Cryptometrics could lose its proprietary rights, be subject to damages and incur substantial unexpected operating expenses. Intellectual property litigation is expensive and time-consuming, even if the claims are subsequently proven unfounded, and could divert management’s attention from its business. If there is a successful claim of infringement, Cryptometrics may

not be able to develop non-infringing technology or enter into royalty or license agreements on acceptable terms, if at all. This could prohibit Cryptometrics from providing its products and services to customers.

IF CRYPTOMETRICS PRODUCTS AND SERVICES DO NOT ACHIEVE MARKET ACCEPTANCE, ITS BUSINESS AND OPERATIONS WOULD BE ADVERSELY AFFECTED.

Biometric-based identification and security is a relatively new technology. Cryptometrics’ products and services may not be widely accepted until such time as it is established and demonstrated to the marketplace that biometric-based identification and security is effective and offers benefits over existing technologies. The failure of Cryptometrics’ products and services to achieve market acceptance, or if accepted in a limited degree, may limit the size of the market for its products and services which would negatively impact its business, financial condition and operating results.

CRYPTOMETRICS MAY ULTIMATELY BE UNABLE TO COMPETE IN THE MARKETS FOR THE PRODUCTS AND SERVICES IT OFFERS.

The markets for Cryptometrics’ products and services are intensely competitive. Increased competition may adversely affect Cryptometrics’ ability to enter into agreements with new customers or strategic partners and may result in reduced margins, any of which could seriously harm Cryptometrics’ business. Many of Cryptometrics’ competitors have longer operating histories, greater brand recognition and greater financial, technical, marketing and other resources than it does, and may have well-established relationships with its existing and prospective customers. This may place Cryptometrics at a disadvantage in responding to its competitors’ pricing strategies, technological advances, advertising campaigns, strategic partnerships and other initiatives. Cryptometrics’ competitors may also develop products or services that are superior to, or have greater market acceptance than, the products and services that Cryptometrics is able to develop. If Cryptometrics is unable to compete successfully against its competitors, its business, financial condition and operating results would be negatively impacted.

RISKS OF A CONGLOMERATE BUSINESS

In the event that the Merger is completed, the surviving corporation will be a conglomerate of the businesses of Cryptometrics and JAG Media. Such conglomerate business may not be successful should management lose focus on, or give greater attention to, one or the other business. Additionally, should the markets in which the Cryptometrics business operates or the JAG Media business operates suffer a decline in profitability, such profit decline will have a negative financial impact on the conglomerate business as a whole.

RISKS RELATED TO NO FAIRNESS OPINION

No independent investment banker or other professional has been retained to issue an opinion with respect to the fairness of the exchange ratio of JAG Media’s common stock and Cryptometrics common stock to either JAG Media’s stockholders or Cryptometrics’ stockholders. The ratio was reached through negotiation by the two companies and was found fair to the stockholders of JAG Media solely by its Board of Directors and fair to the stockholders of Cryptometrics solely by its Board of Directors.

RISKS OF NON-COMPLETION COSTS

Merger-related costs consist principally of charges related to professional services, mailing and printing costs, registration and other regulatory costs and are expected to exceed $1,000,000. In the event that the Merger is not consummated, the parties will still each remain liable to pay its share of the total Merger-related costs.

APPRAISAL RIGHTS

Those holders of shares of Cryptometrics Common Stock who do not submit a written consent to authorize the Merger Agreement and who properly demand appraisal of their shares will be entitled to appraisal rights in connection with the Merger under Section 262 of the General Corporation Law of the State of Delaware, which is referred to herein as Section 262.

THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW PERTAINING TO APPRAISAL RIGHTS UNDER SECTION 262 AND IS QUALIFIED IN ITS ENTIRETY BY THE FULL TEXT OF SECTION 262 AS IT APPLIES TO THIS TRANSACTION WHICH IS INCLUDED AS APPENDIX D. ALL REFERENCES IN SECTION 262 AND IN THIS SUMMARY TO A “STOCKHOLDER” ARE TO THE RECORD HOLDER OF THE SHARES OF CRYPTOMETRICS COMMON STOCK AS TO WHICH APPRAISAL RIGHTS ARE ASSERTED. A PERSON HAVING A BENEFICIAL INTEREST IN SHARES OF CRYPTOMETRICS COMMON STOCK HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A BROKER, FIDUCIARY, DEPOSITARY OR OTHER NOMINEE, MUST ACT PROMPTLY TO CAUSE THE RECORD HOLDER TO FOLLOW THE STEPS SUMMARIZED BELOW PROPERLY AND IN A TIMELY MANNER TO PERFECT APPRAISAL RIGHTS.

Under Section 262, persons who hold shares of Cryptometrics Common Stock who follow the procedures set forth in Section 262 will be entitled to have their shares of Cryptometrics Common Stock appraised by the Delaware Court of Chancery and to receive payment of the “fair value” of the shares, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with a fair rate of interest, as determined by the court.

Any holder of Cryptometrics Common Stock who wishes to exercise appraisal rights or who wishes to preserve such holder’s right to do so, should review the following discussion and Appendix D carefully because failure to timely and properly comply with the procedures specified will result in the loss of appraisal rights. Holders of Cryptometrics Common Stock who wish to exercise their appraisal rights must not submit a written consent, but must, as described below, timely submit a written demand for appraisal.

A holder of shares of Cryptometrics Common Stock wishing to exercise the holder’s appraisal rights must deliver to Cryptometrics, within 20 days after the date of the mailing of this Consent Solicitation/Prospectus, a written demand for the appraisal of such holder’s shares. A holder of shares of Cryptometrics Common Stock wishing to exercise appraisal rights must hold of record the shares on the date the written demand for appraisal is made and must continue to hold the shares of record through the Effective Time of the Merger. The written demand must reasonably inform Cryptometrics of the identity of the holder as well as the intention of the holder to demand an appraisal of the “fair value” of the shares held by the holder. A stockholder’s failure to make the written demand within such 20 day period will constitute a waiver of appraisal rights.

Only a holder of record of shares of Cryptometrics Common Stock is entitled to assert appraisal rights for the shares of Cryptometrics Common Stock registered in that holder’s name. A demand for appraisal in respect of shares of Cryptometrics Common Stock should be executed by or on behalf of the holder of record, fully and correctly, as the holder’s name appears on the holder’s stock certificates, and must state that the person intends thereby to demand appraisal of the holder’s shares of Cryptometrics Common Stock in connection with the Merger. If the shares of Cryptometrics Common Stock are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of the demand should be made in that capacity, and if the shares of Cryptometrics Common Stock are owned of record by more than one person, as in a joint tenancy and tenancy in common, the demand should be executed by or on behalf of all joint owners. An authorized agent, including an agent for two or more joint owners, may execute a demand for appraisal on behalf of a holder of record; however, the agent must identify the record owner or owners and expressly disclose the fact that, in executing the demand, the agent is acting as agent for the record owner or owners. A record holder such as a broker who holds shares of Cryptometrics Common Stock as nominee for several beneficial owners may exercise appraisal rights with respect to the shares of Cryptometrics Common Stock held for one or more beneficial owners while not exercising the rights with respect to the shares of Cryptometrics Common Stock held for other beneficial owners; in such case, however, the written demand should set forth the number of shares of Cryptometrics Common Stock as to which appraisal is sought and where no number of shares of Cryptometrics Common Stock is expressly mentioned the demand will be presumed to cover all shares of Cryptometrics Common Stock held in the name of the record owner. Stockholders who hold their shares of Cryptometrics Common Stock in brokerage accounts or other nominee forms and who wish to exercise appraisal rights are urged to consult with their brokers to determine the appropriate procedures for the making of a demand for appraisal by such a nominee.

All written demands for appraisal pursuant to Section 262 should be sent or delivered to Cryptometrics, Inc., 73 Main Street, Tuckahoe, New York 10707, Attention: Robert Barra, Co-Chief Executive Officer.

Within 10 days after the Effective Time of the Merger, the surviving corporation must notify each holder of Cryptometrics Common Stock who has complied with Section 262 that the Merger has become effective. Within 120 days after the Effective Time of the Merger, but not thereafter, the surviving corporation or any holder of Cryptometrics Common Stock who has so complied with Section 262 and is entitled to appraisal rights under Section 262 may file a petition in the Delaware Court of Chancery demanding a determination of the fair value of the holder’s shares of Cryptometrics Common Stock. The surviving corporation is under no obligation to and has no present intention to file a petition. Accordingly, it is the obligation of the holders of Cryptometrics Common Stock to initiate all necessary action to perfect their appraisal rights in respect of shares of Cryptometrics Common Stock within the time prescribed in Section 262.

Within 120 days after the Effective Time of the Merger, any holder of Cryptometrics Common Stock who has complied with the requirements for exercise of appraisal rights will be entitled, upon written request, to receive from the surviving corporation a statement setting forth the aggregate number of shares not voted in favor of the adoption of the Merger Agreement and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. The statement must be mailed within ten days after a written request therefor has been received by the surviving corporation or within ten days after the expiration of the period for delivery of demands for appraisal, whichever is later.

If a petition for an appraisal is timely filed by a holder of shares of Cryptometrics Common Stock and a copy thereof is served upon the surviving corporation, the surviving corporation will then be obligated within 20 days to file with the Delaware Register in Chancery a duly verified list containing the names and addresses of all stockholders who have demanded an appraisal of their shares and with whom agreements as to the value of their shares have not been reached. After notice to the stockholders as required by the Court, the Delaware Court of Chancery is empowered to conduct a hearing on the petition to determine those stockholders who have complied with Section 262 and who have become entitled to appraisal rights thereunder. The Delaware Court of Chancery may require the holders of shares of Cryptometrics Common Stock who demanded payment for their shares to submit their stock certificates to the Register in Chancery for notation thereon of the pendency of the appraisal proceeding; and if any stockholder fails to comply with the direction, the Court of Chancery may dismiss the proceedings as to the stockholder.

After determining the holders of Cryptometrics Common Stock entitled to appraisal, the Delaware Court of Chancery will appraise the “fair value” of their shares of Cryptometrics Common Stock, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value. Holders of Cryptometrics Common Stock considering seeking appraisal should be aware that the fair value of their shares of Cryptometrics Common Stock as so determined could be more than, the same as or less than the consideration they would receive pursuant to the Merger if they did not seek appraisal of their shares of Cryptometrics Common Stock and that investment banking opinions as to the fairness from a financial point of view of the consideration payable in a Merger are not necessarily opinions as to fair value under Section 262. We do not anticipate offering more than the Merger consideration to any stockholder exercising appraisal rights and reserve the right to assert, in any appraisal proceeding, that, for purposes of Section 262, the “fair value” of a share of Cryptometrics Common Stock is less than the Merger consideration. The Delaware Supreme Court has stated that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered in the appraisal proceedings. In addition, Delaware courts have decided that the statutory appraisal remedy, depending on factual circumstances, may or may not be a stockholder’s exclusive remedy. The Court will also determine the amount of interest, if any, to be paid upon the amounts to be received by persons whose shares of Cryptometrics Common Stock have been appraised. The costs of the action may be determined by the Court and taxed upon the parties as the Court deems equitable. The Court may also order that all or a portion of the expenses incurred by any stockholder in connection with an appraisal, including, without limitation, reasonable attorneys’ fees and the fees

and expenses of experts utilized in the appraisal proceeding, be charged pro rata against the value of all the shares entitled to be appraised.

Any holder of shares of Cryptometrics Common Stock who has duly demanded an appraisal in compliance with Section 262 will not, after the Effective Time of the Merger, be entitled to vote the shares of Cryptometrics Common Stock subject to the demand for any purpose or be entitled to the payment of dividends or other distributions on those shares of Cryptometrics Common Stock (except dividends or other distributions payable to holders of record of Cryptometrics Common Stock as of a record date prior to the Effective Time of the Merger).

If any stockholder who demands appraisal of shares of Cryptometrics Common Stock under Section 262 fails to perfect, or effectively withdraws or loses, such holder’s right to appraisal, the shares of Cryptometrics Common Stock of the stockholder will be converted into the right to receive the Merger consideration. A stockholder will fail to perfect, or effectively lose or withdraw, the holder’s right to appraisal if no petition for appraisal is filed within 120 days after the Effective Time of the Merger, or if the stockholder delivers to the surviving corporation a written withdrawal of the holder’s demand for appraisal and an acceptance of the Merger, except that any attempt to withdraw made more than 60 days after the Effective Time of the Merger will require the written approval of the surviving corporation and, once a petition for appraisal is filed, the appraisal proceeding may not be dismissed as to any holder absent court approval.

FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 FOR PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS (IN WHICH EVENT THE HOLDER OF CRYPTOMETRICS COMMON STOCK WILL BE ENTITLED TO RECEIVE THE CONSIDERATION SPECIFIED IN THE MERGER AGREEMENT).

THE MERGER

GENERAL

This Consent Solicitation/Prospectus is being furnished to stockholders of Cryptometrics as a consent solicitation in connection with the authorization of the Merger Agreement, although the holders of a majority of the outstanding Cryptometrics Common Stock entitled to vote are required by the Company Voting and Lock-Up Agreement attached hereto as Exhibit A to Appendix C-1 to authorize the Merger Agreement. Such authorization by such majority holders will be sufficient under Delaware law to authorize the Merger Agreement. This Consent Solicitation/Prospectus also constitutes a prospectus, which is part of a registration statement on Form S-4 filed by JAG Media with the SEC under the Securities Act of 1933, as amended (the “Securities Act”), in order to register the shares of JAG Media Common Stock to be issued to the Cryptometrics stockholders in connection with the Merger and to register a subsequent resale of such securities by certain affiliates of Cryptometrics.

If and when the Merger is completed:


	•	Merger Sub (Cryptometrics Acquisition, Inc.) will be merged into Cryptometrics;

	•	Cryptometrics, as the surviving corporation after the Merger, will become a wholly-owned subsidiary of JAG Media;

	•	JAG Media will change its name to “Cryptometrics, Inc.”; and

	•	each holder of Cryptometrics Common Stock will have the right to receive shares of JAG Media Common Stock in the amount described herein for each share of Cryptometrics Common Stock held.

Immediately after the Merger, JAG Media Common Stock will be held approximately as follows: (i) 13% by former stockholders of JAG Media and (ii) 87% by former stockholders of Cryptometrics. JAG Media and Cryptometrics have agreed that, immediately following the closing of the Merger (the “Closing”), Cryptometrics will be merged into a limited liability company (LLC) subsidiary of JAG Media with such limited liability company subsidiary surviving (such Merger, the “Second Step Transaction”). The Second Step Transaction, an internal reorganization, will have no effect on the number of JAG Media shares you are to receive.

BACKGROUND OF THE MERGER

For some time it has been part of JAG Media’s strategy to pursue merger opportunities. A merger candidate need not be in its specific line of business. JAG Media’s merger strategy has become an increasingly higher priority as its other strategic efforts to reverse the current downward trend of its revenues by re-focusing on servicing the institutional segment of the market for the JAG Notes product and by supporting its Pixaya business unit and to curtail costs have failed to produce results sufficient to sustain its business. Pursuant to its merger strategy, JAG Media has looked at various possible merger candidates for the past three years. The possibility of a transaction between JAG Media and Cryptometrics was first introduced to JAG Media by Albert Auer of Flow Capital Advisers, Inc., an investment banking firm, which had previously introduced another merger candidate to JAG Media, pursuant to a prior written finder’s agreement between Flow Capital and JAG Media dated January 5, 2004. JAG Media and the previous merger candidate were unable to agree upon final business terms and the proposed transaction was abandoned by the parties.

Albert Auer contacted Gary Valinoti, a consultant to JAG Media and previously its Chief Executive Officer, with whom Mr. Auer had worked on the prior transaction. Mr. Auer contacted Mr. Valinoti in the first week of August 2004, briefly described Cryptometrics, Inc. and identified Joseph Nese as the contact person for the investment bankers acting as finders for Cryptometrics. Flow Capital and JAG Media subsequently entered into a written finder’s agreement dated March 14, 2005 regarding the potential Cryptometrics transaction. Although Flow Capital has informed JAG Media that it continues to be entitled to a finder’s fee of 0.66% of the consideration for the Merger, JAG Media believes that the subsequent finder’s agreement between JAG Media and Flow Capital expired in accordance with its terms on December 31, 2006, as the Merger was not completed by such date.

A meeting was arranged for later in the first week of August 2004 at the executive offices of Cryptometrics, Inc. in Tuckahoe, New York. Those attending the meeting were Robert Barra, the Co-Chief Executive Officer of Cryptometrics, Paul Reid, its product manager, Joseph Nese, Gary Valinoti and Stephen Schoepfer, the President of JAG Media. The meeting consisted primarily of a presentation by Cryptometrics of its biometrics technology. There was no discussion of any transaction between the two companies.

In September 2004, Thomas J. Mazzarisi, Chief Executive Officer of JAG Media, supplied a form of Mutual Non-Disclosure Agreement to Robert Barra, which was executed by him on September 27, 2004 so that the companies would be in a position to discuss a possible transaction.

During the first and second weeks of October 2004, emails were transmitted between Cryptometrics and JAG Media, principally to and from Messrs. Barra, Nese, Mazzarisi and Schoepfer, by which Cryptometrics forwarded a copy of its PowerPoint presentation and its projected financial results.

Cryptometrics also provided JAG Media additional information regarding marketing and potential contracts it was trying to obtain.

In response to a request of Cryptometrics for a term sheet, Thomas J. Mazzarisi transmitted the first draft of a term sheet to Robert Barra on October 29, 2004. The term sheet provided for JAG Media to issue 35,000,000 shares to Cryptometrics shareholders at closing, together with a post-closing earn out tied to various revenue milestones, which provided for Cryptometrics shareholders to receive up to an additional 40,000,000 shares.

After various discussions in which Cryptometrics rejected the proposed structure of the term sheet, JAG Media prepared a second draft of the term sheet which Thomas Mazzarisi sent to Joseph Nese on November 22, 2004. The second draft of the term sheet provided for Cryptometrics shareholders to receive an 85% interest in JAG Media at closing. This draft of the term sheet also contained a twelve-month lockup provision with respect to all such JAG Media shares. In response to Cryptometrics comments requesting an increase in the shares payable to the Cryptometrics shareholders and a request for only a partial lockup, Thomas Mazzarisi transmitted a third draft of a term sheet to Joseph Nese on December 3, 2004. This draft increased the percentage of the shares being issued to Cryptometrics shareholders from 85% to 87% and also included a to-be-determined carve out from the twelve month lockup.

On December 16, 2004 there was a meeting at the offices of Cryptometrics’ counsel, Greenberg Traurig LLP, in New York City attended by both companies and their respective counsel. Those attending the meeting on behalf

of JAG Media included Thomas Mazzarisi, Stephen Schoepfer and Preston Tollinger of Morgan, Lewis & Bockius LLP, counsel for JAG Media. Those attending on behalf of Cryptometrics included Robert Barra and Michael Vitale, co-chief executive officers, Paul Reid, Robert Tasinari of TNS Consulting Corporation, finders for Cryptometrics, Joseph Nese and Alan Annex, of Greenberg Traurig LLP. Paul Reid led a presentation of Cryptometrics products and technology, following which there was a detailed discussion of the company’s operations and business.

On December 22, 2004 there was a conference call between Thomas Mazzarisi and Stephen Schoepfer representing JAG Media and Robert Barra, Joseph Nese and Robert Tasinari representing Cryptometrics. The conference call discussed the third draft of the term sheet which had been provided by Mr. Mazzarisi and JAG Media’s due diligence requests.

Following up on JAG Media’s request for financial information, on January 21, 2005 Cryptometrics emailed to JAG Media the draft audited financials for its Canadian subsidiary, covering fiscal years from 2002 through March 10, 2004.

On February 8, 2005, there was a second meeting at Cryptometrics headquarters, attended by Thomas Mazzarisi and Stephen Schoepfer on behalf of JAG Media, Cryptometrics’ finders and investment bankers Joseph Nese and Robert Tasinari, and Cryptometrics advisor, Thomas O’Neil of Sandler O’Neil & Partners, L.P., and Cryptometrics co-chief executive officers Robert Barra and Michael Vitale. The discussions focused on Cryptometrics’ Private Placement Memorandum, pending contracts, teaming agreements, strategic partnerships, and opportunities with government agencies both foreign and domestic. A conference call then took place two days later among Thomas Mazzarisi, Stephen Schoepfer, Robert Barra, Robert Tasinari and Joseph Nese, to assess the progress in the transaction.

During the third week of March 2005, there was a conference call between JAG Media’s litigation counsel, Wes Christian, Thomas Mazzarisi, Robert Barra, Michael Vitale, and Robert Tasinari. The conference call focused on a pending lawsuit brought by JAG Media against various brokerage firms.

On April 8, 2005, Robert Barra of Cryptometrics wrote a letter to Thomas Mazzarisi of JAG Media regarding the status of Cryptometrics’ private placement, indicating that approximately $15 million had been raised. Cryptometrics also stated that it anticipated the private placement would soon close and requested a revised term sheet. In response to Cryptometrics’ request, on April 21, 2005 Thomas Mazzarisi transmitted a fourth draft of the term sheet to Cryptometrics. This draft specified a 35% carve out from the one year lockup provision and continued to provide for the issuance of 87% of JAG Media’s shares to Cryptometrics shareholders. A week later Robert Tasinari on behalf of Cryptometrics requested Thomas Mazzarisi to execute the term sheet as a condition to the transaction discussions continuing, which JAG Media declined to do until it was provided audited financial information.

Although for several months there was no substantive discussion between the companies pending the receipt of more complete audited financial information by JAG Media, there was a conference call on June 20, 2005 again related to the status of JAG Media’s lawsuit against various brokerage firms and the issue of so called “naked short sales” which might be affecting JAG Media. Those on the conference call included Thomas Mazzarisi, Stephen Schoepfer, and Wes Christian on behalf of JAG Media, Robert Barra and Robert Tasinari on behalf of Cryptometrics, as well as Michael Stolzar of Dorf, Karlen & Stolzar, LLP, Cryptometrics’ counsel.

On August 10, 2005 Mr. Robert Barra delivered to JAG Media’s counsel financial statements for Cryptometrics’ Canadian Subsidiary and draft consolidated financial statements for Cryptometrics, together with updated marketing materials. Robert Barra also sent emails to Thomas Mazzarisi requesting certain information and discussing JAG Media’s need for Cryptometrics to participate in various legal and accounting fees which would be incurred in connection with the proposed transaction.

On August 19, 2005 Michael Stolzar sent to Preston Tollinger a revised term sheet based upon the fourth draft provided by JAG Media on April 21, 2005. The revised term sheet contained a proposed cap of $62,500 of legal fees to be borne by Cryptometrics. On August 22, 2005 Cryptometrics faxed to counsel for JAG Media the consolidated audited financials for Cryptometrics. On August 29, 2005 there was a conference call which discussed in detail the draft term sheet, the structure of the transaction, SEC requirements and other legal and timing issues related to the

transaction. Those on the conference call included Preston Tollinger, David Sirignano and Owen Littman from Morgan Lewis & Bockius LLP, Michael Stolzar from Dorf, Karlen & Stolzar, LLP, Robert Barra, Michael Vitale and Robert Tasinari on behalf of Cryptometrics and Thomas Mazzarisi and Steve Schoepfer on behalf of JAG Media. On September 9, 2005 counsel for Cryptometrics and JAG Media exchanged a revised term sheet which increased the number of shares being issued to Cryptometrics shareholders from 87.5% to 88% to compensate for $2,000,000 of indebtedness which JAG Media had incurred. This term sheet also included a resolution of the funding of legal fees with each of JAG Media and Cryptometrics providing $50,000 of initial funding. This term sheet was executed on September 9, 2005 by Thomas Mazzarisi and forwarded to Robert Barra for signature. The term sheet was subsequently signed by Robert Barra on behalf of Cryptometrics and delivered to JAG Media.

Subsequently, during the last week of October 2005 JAG Media indicated that it was going to increase its indebtedness by $750,000, as a result of which a final adjustment to 88.175% was made to the percentage amount of JAG Media common stock which is to be distributed to the Cryptometrics stockholders.

While JAG Media considered other opportunities with a variety of businesses, JAG Media determined that the Merger with Cryptometrics represented the best opportunity for JAG Media’s stockholders. Within the period from August 2004 when JAG Media first considered the Cryptometrics transaction, to December 2005, JAG Media considered ten other opportunities in addition to the Cryptometrics transaction. JAG Media conducted varying levels of due diligence for each such possible target, after first entering into signed non-disclosure agreements in all but one instance, but did not execute formal letters of intent with the targets. The target companies included (1) a manufacturer of pre-packaged foods furnished to institutions, convenience stores, vending machine operators and retail grocery store chains; (2) a provider and operator of E*Bay drop shops; (3) two compounding pharmacies; (4) a manufacturer of circuit boards; (5) a biotech company developing a point-of-care diagnostic platform; (6) a provider of passive human detection technology and related products for homeland security, military, law enforcement, rescue and other applications; (7) a China-based tire recycling company; (8) a provider of wide area networks and (9) a provider of clip-on sunglasses. None of these potential merger candidates had as much cash or appeared to have as good access to financing as Cryptometrics and, therefore, JAG Media believed such candidates would be less able to complete the transaction and support the merged businesses. While the above-noted targets would have required cash infusions of various significant amounts as a condition to consummation of the closing of their transactions, Cryptometrics had recently completed a round of financing in which it had raised approximately $17.5 million, so that financing was not a condition of the Merger.

In the view of JAG Media, none of these target companies offered the potential upside of Cryptometrics or in most cases offered any synergy with any of JAG Media’s Pixaya software product lines, which could make JAG Media a more valuable merger partner. Conversely, the technology of JAG Media’s Pixaya business unit has significant synergistic value with Cryptometrics’ current and future technological platforms and product offerings. At present, Pixaya has a limited ability to market its technology on a stand alone basis. However, when this technology is incorporated into Cryptometrics’ systems and applications, it adds another dimension to Cryptometrics’ existing technology and provides the merged company with a broader solutions package which certain of Cryptometrics’ potential customers may prefer. Pixaya’s technology, especially its SurvayaCam, enables Cryptometrics to expand its offerings for protecting the critical infrastructure and key assets of a nation and its businesses. This technology provides Cryptometrics with an additional way to provide machine-assisted solutions for collecting, delivering and intelligently managing videos that have been captured, overtly or covertly, including from cameras mounted in moving vehicles. Pixaya technology supports encrypted communication of video as well as remote setting of the cameras and also provides redundancy to help guarantee communication of the video stream.

Specifically, Pixaya’s technology provides:


	•	a way for video generated from a variety of sources to be communicated to a centralized processing system for automated analysis;

	•	a way to centrally manage remotely captured video, including recording the video in a variety of formats for later retrieval and playback; and


	•	a way of viewing a single video stream or multiple streams on a single display screen, zooming in real-time to reveal greater detail and record annotations by simply drawing on the screen.

With this technology incorporated into Cryptometrics’ platforms and systems for facial recognition, for example, Cryptometrics will be able to deliver turnkey systems capable of processing video captured from a camera mounted in a police car for the purpose of automatically detecting when an officer checking a stopped vehicle needs assistance. The Cryptometrics platform as so enhanced would provide an infrastructure for capturing and transmitting through wireless communication facial images and other video data from remote vehicles or border outposts for the purpose of identifying persons who might pose a threat.

The agreement and plan of merger and the Company Voting and Lock-up Agreement included as Exhibit A to such agreement were executed by the parties to such agreements as of December 27, 2005. Cryptometrics’ directors and majority shareholders, who are Messrs. Barra and Vitale in both cases, approved such agreements on behalf of Cryptometrics by written consents dated December 27, 2005.

After the agreement and plan of merger was executed on December 27, 2005, JAG Media and Cryptometrics addressed the three major conditions to the closing of the Merger, namely (1) the filing and effectiveness of a Registration Statement on Form S-4, (2) the approval of JAG Media’s stockholders of (a) an increase in its authorized shares of common stock from 250,000,000 to 500,000,000 and (b) a change in its name to Cryptometrics, Inc. upon completion of the Merger and (3) the listing of Cryptometrics shares on the NASDAQ Capital Market upon completion of the Merger.

The Registration Statement was filed with the SEC on January 13, 2006 and was declared effective by the SEC on March 16, 2006. JAG Media’s stockholders approved the increase in its shares of common stock to 500,000,000 and the conditional proposed name change of JAG Media to “Cryptometrics, Inc.” at a meeting of its stockholders held on April 26, 2006. A further condition of the Merger, the approval of the agreement and plan of merger as amended to date by the holders of a majority of the outstanding shares of Cryptometrics Common Stock, has not yet been satisfied.

The NASDAQ listing application was submitted by Cryptometrics to NASDAQ on March 31, 2006. From April through June 2006, Cryptometrics and JAG Media responded to various comments on the NASDAQ listing application posed by NASDAQ and during June and July 2006 Cryptometrics had meetings with representatives of NASDAQ regarding the status of the NASDAQ listing application. According to Cryptometrics, although NASDAQ did not approve the NASDAQ listing application, it did acknowledge Cryptometrics had met all of the listing requirements, except for stock price, and that NASDAQ would leave the application open pending Cryptometrics’ trading on the OTCBB or the Pink Sheets at a price sufficient to satisfy the NASDAQ’s stock price requirements. Cryptometrics has indicated that it intends to continue pursuing its NASDAQ listing once the stock of the merged companies has traded at the required levels on the OTCBB or the Pink Sheets.

JAG Media and Cryptometrics began discussions in early July 2006 regarding the steps that would need to be taken to move the transaction forward. Those discussions included a potential restructuring of JAG Media’s May 2006 financing with YA Global Investments, L.P. (then known as Cornell Capital Partners, L.P.), removal of the NASDAQ listing as a condition to the Closing and certain other amendments to the original agreement and plan of merger dated December 27, 2005. On July 18, 2006 Thomas Mazzarisi, Stephen Schoepfer, Robert Barra and Michael Vitale met at Cryptometrics’ offices in New York to discuss such matters.

On September 14, 2006, Thomas Mazzarisi, Stephen Schoepfer, Robert Barra and Joel Shaw met with representatives of YA Global in order to introduce Cryptometrics to YA Global prior to JAG Media and Cryptometrics making a formal proposal to YA Global regarding the restructuring of their financing. The parties did not address any terms of a potential restructuring of the YA Global financing at this meeting, but rather the meeting focused on Cryptometrics business, including its business opportunities in the near future.

JAG Media prepared a proposed agreement for the restructuring of the YA Global financing, principally by amending the number of shares subject to the warrants issued to YA Global, and on September 19, 2006 submitted the proposed agreement to Cryptometrics for its review and approval. After a final draft was approved by Cryptometrics, JAG Media submitted the draft agreement to YA Global for its review and comments on September 21, 2006.

On October 27, 2006, the parties reached an agreement in principle on the fundamental terms of the YA Global restructuring and tried to finalize an agreement. On November 17, 2006, an understanding with YA Global regarding the restructuring of its financing, principally by amending the exercise prices and dates of the warrants, was reached and on that same day JAG Media sent a proposed amendment to the original agreement and plan of merger to Cryptometrics for its review and comment.

On November 9, 2006, Cryptometrics notified JAG Media that, in consideration for the increase in the debt limitation under their current agreement from $2,750,000 to $4,350,000 resulting from the YA Global financing in May 2006 and Cryptometrics paying an additional $175,000 in transaction costs, and in light of the then current position of the two businesses, it wanted an additional 10 million shares of JAG Media Common Stock issued directly to Cryptometrics and registered for sale immediately after the closing date. When such a structure did not prove to be feasible, Cryptometrics requested an increase in the exchange ratio for JAG Media shares which would be acceptable to both parties and permissible in light of the number of JAG Media authorized shares of common stock. As negotiations continued on the proposed amendment throughout December 2006, issues principally related to the number of shares reserved for issuance to YA Global arose which resulted in negotiations being reopened on the previously finalized YA Global agreement.

While negotiations continued, on January 9, 2007 Cryptometrics made an advance payment of $10,000 to J.H. Cohn LLP, JAG Media’s auditors, so they could begin work on the various SEC filings that would be required to consummate the transaction.

On January 23, 2007, JAG Media, YA Global, Cryptometrics and Robert Barra and Michael Vitale, the principals of Cryptometrics, agreed upon a final version of the YA Global agreement. The YA Global agreement also provided that YA Global would not convert any of its debentures or exercise any of its warrants prior to the closing of the Merger and that the YA Global agreement would automatically terminate if the Merger between JAG Media and Cryptometrics did not occur by March 15, 2007. See Exhibit 10.26 to the Registration Statement for the full text. JAG Media signed the YA Global agreement on January 23, 2007 and distributed it to Cryptometrics on that same day for signature. Cryptometrics signed the YA Global agreement on January 24, 2007 and YA Global signed it on January 26, 2007.

On January 24, 2007 JAG Media, Cryptometrics, and the other parties to the original agreement and plan of merger agreed upon an Amendment in which Cryptometrics, among other matters, approved the agreement regarding the restructuring of the YA Global financing, waived the condition requiring JAG Media’s stock be authorized for listing on the NASDAQ Capital Market prior to the Closing and agreed to fund various expenses of JAG Media in connection with the Closing. JAG Media and Cryptometrics also agreed on a fixed increased consideration to be received by the Cryptometrics stockholder in the Merger of 394,700,016 shares of JAG Media’s Common Stock and to establish an escrow for various closing documents in order to facilitate the Closing of the transaction. The Amendment also provided for a tentative closing date of February 28, 2006 and automatic termination of the Merger Agreement if the Closing did not occur by March 15, 2007. JAG Media signed the Amendment on January 25, 2007 and Cryptometrics and the other relevant parties signed the Amendment on January 26, 2007. See Appendix C-2 hereto for the full text of such Amendment.

After determining that the Merger would not be able to close by the automatic termination date of March 15, 2007 set forth in the YA Global agreement and the Amendment, the parties to the respective agreements agreed to change the closing date to March 30, 2007 and the automatic termination date to April 6, 2007. Accordingly, the parties to the January 24, 2007 Amendment entered into a further amendment, dated February 26, 2007 which extended the automatic termination date to April 6, 2007 and the closing date to March 30, 2007. See Appendix C-3 hereto for the full text of such Amendment. Cryptometrics’ directors and majority shareholders, who are Messrs Barra and Vitale in both cases, approved the January 24, 2007 and February 26,2007 amendments to the Merger Agreement as of March 1, 2007. Because of the failure to give prompt notice of such shareholder action to Cryptometrics’ other shareholders, such shareholder approval became ineffective under Delaware law, which the majority shareholders confirmed by rescinding all prior shareholder approvals of the Merger Agreement and the Merger by a written action dated September 12, 2007.

The parties to the Amendment entered into subsequent amendments dated April 2, 2007, April 20, 2007, May 11, 2007 May 18, 2007, June 15, 2007, July 16, 2007, August 16, 2007, November 7, 2007 and February 6,

2008 to extend the automatic termination date of the Merger Agreement. See Appendices C-4 through C-12 hereto for the full text of such Amendments. The amendment dated February 6, 2008 extended the automatic termination date to March 31, 2008. Under the terms of the amendment dated May 18, 2007, Cryptometrics agreed to pay $167,659.84 of transaction costs incurred in connection with the Merger in exchange for the grant to Cryptometrics of a non-exclusive, royalty free, perpetual license to use certain intellectual property of JAG Media’s subsidiary, Pixaya (UK) Limited. In addition, Cryptometrics agreed to pay up to $150,000 in additional transaction costs and JAG Media agreed to issue Cryptometrics 500,000 shares of JAG Media’s common stock (in addition to the 500,000 shares previously agreed upon in the January 24, 2007 amendment to the Merger Agreement) if the Merger Agreement is terminated by JAG Media or YA Global for any reason. Notwithstanding the foregoing, if Cryptometrics fails to pay any required amount of the $150,000 or if the Registration Statement of which this Consent Solicitation/Prospectus is a part is declared effective and Cryptometrics fails to close the transaction and file the certificate of merger by the automatic termination date then in effect, Cryptometrics will not be entitled to receive such 500,000 shares of JAG Media common stock. Under the terms of the amendments dated August 16, 2007 and November 7, 2007, Cryptometrics agreed to pay an additional $300,000 of JAG Media’s transaction costs, subject to certain reimbursement obligations of JAG Media. Under the February 6, 2008 amendment, JAG Media and Cryptometrics agreed to be responsible for their own expenses going forward and agreed that JAG Media was not required to reimburse Cryptometics for any expenses paid on its behalf.

The parties to the YA Global agreement entered into similar subsequent amendments to the YA Global agreement dated February 26, 2007, April 2, 2007, April 20, 2007, May 11, 2007 May 18, 2007, June 15, 2007, July 16, 2007, September 10, 2007 and November 7, 2007 filed as Exhibits 10.27, 10.28, 10.29, 10.30, 10.31, 10.32, 10.33, 10.34 and 10.35 to the Registration Statement of which this Consent Solicitation/Prospectus is a part to extend the termination date under the YA Global agreement. The amendment to the YA Global agreement dated November 7, 2007 extended the termination date to December 15, 2007. The YA Global agreement and all such amendments automatically terminated on December 15, 2007 in accordance with their terms.

On January 31, 2008 JAG Media entered into a new letter agreement with YA Global pursuant to which YA Global on January 31, 2008 converted the remaining outstanding principal amount of JAG Media’s convertible debentures, as well as all accrued interest on such debentures, into JAG Media’s common stock and exercised a warrant for 700,000 shares of JAG Media’s common stock, providing JAG Media with $280,000 in cash proceeds. YA Global and JAG Media also agreed to amend the exercise dates and prices of the remaining warrants, which amendment will become ineffective on February 27, 2008 if the Merger has not yet occurred by that date, unless the parties agree to extend such date. The January 31, 2008 letter agreement is filed as Exhibit 10.36 to the Registration Statement of which the Consent Solicitation/Prospectus is part and should be reviewed for further information regarding its terms.

CRYPTOMETRICS’ REASONS FOR THE MERGER

The Board of Directors of Cryptometrics, Inc. has approved the Merger Agreement and determined that the Merger is fair and advisable and in the best interests of Cryptometrics and its stockholders.

In reaching the decision to adopt the Merger Agreement, the Board of Directors of Cryptometrics considered a number of factors including the following:


	•	The shares of JAG Media Common Stock offered as the Merger consideration would effectively create a public trading market for Cryptometrics Common Stock and permit the unrestricted trading in stock of the combined company by the current or non-affiliated stockholders of Cryptometrics (subject to not being permitted to sell 65% of the shares of JAG Media held by them for one year after the effectiveness of the Merger) instead of their current position as holders of common stock of a private company;

	•	The terms and conditions of the Merger Agreement, including the fact that Cryptometrics may terminate the Merger Agreement at any time or for any reason;

	•	The percentage of the combined company to be owned by the current Cryptometrics stockholders following the Merger; and

	•	Historical financial information concerning Cryptometrics and JAG Media, which generally informed the Board of Directors of Cryptometrics’ determination as to the relative values of the two companies.

The Board of Directors of Cryptometrics also considered certain potential risks related to the Merger, including but not limited to the risks related to the Merger not being consummated, with resulting distraction in the interim to Cryptometrics normal business operations. The Board of Directors of Cryptometrics believed, however, that these risks were outweighed by the potential benefits to be realized from the Merger.

Based on this analysis, the Board of Directors of Cryptometrics unanimously determined that the Merger is fair to, and in the best interests of Cryptometrics stockholders. The foregoing discussion of the information and the factors considered by the Board of Directors of Cryptometrics is not intended to be exhaustive, and such information and factors were considered collectively by the Board of Directors of Cryptometrics in connection with its review of the Merger Agreement and the transaction contemplated thereby. In lieu of the variety of factors considered in connection with its evaluation of the Merger, the Board of Directors of Cryptometrics did not find it practicable to, and did not quantify or otherwise assign relative weights to, the specific factors considered in reaching its determination. In addition, the individual members of the Board of Directors of Cryptometrics may have given different weight to different factors.

RECOMMENDATIONS OF CRYPTOMETRICS’ BOARD OF DIRECTORS

The Board of Directors of Cryptometrics believes that the Merger is fair to, and in the best interests of Cryptometrics and its stockholders. Accordingly, the Board of Directors of Cryptometrics has unanimously approved the Merger Agreement and recommends that the Cryptometrics principal stockholders consent to the approval and adoption of the Merger Agreement and related Merger.

COUNTERVAILING CONSIDERATIONS

The Board of Directors of Cryptometrics also identified and considered a number of potentially negative factors in their deliberations concerning the Merger, including, but not limited to:


	•	the risk that, despite the efforts of Cryptometrics, key personnel might choose not to remain employed by Cryptometrics, as the surviving corporation, after the Merger;

	•	the risk that the potential benefits sought in the Merger might not be realized fully, or within the time frame contemplated, if at all;

	•	the possibility that the Merger would not be completed and the effect of the abandonment of the Merger on Cryptometrics’ ability to attract and retain key management, sales, marketing and technical personnel;

	•	the substantial charges to be incurred, including transaction expenses arising from the Merger; and

	•	the other risks associated with each company’s business, the Merger and the combination of the companies described under the section entitled “Risk Factors” beginning on page 10.

The Board of Directors of Cryptometrics believes that the potential benefits of the Merger outweigh these risks.

THE CONSENT SOLICITATION

Pursuant to the terms of the Company Voting and Lock-Up Agreement, attached as Exhibit A to Appendix C-1, Robert Barra and Michael A. Vitale, who each own 28.07% of the outstanding Cryptometrics common stock entitled to vote on the Merger Agreement, have agreed to execute written consents authorizing the Merger Agreement. Consequently, the required vote under Delaware law will be obtained and the Merger Agreement will be duly authorized.

Cryptometrics has, however, decided to seek the written consent of all holders of record as of the close of business on December 5, 2007 of Cryptometrics Common Stock to authorize the Merger Agreement. It is important to note that based on the contractual obligations of Messrs. Barra and Vitale, whether or not your consent is received, the Merger will be consummated, assuming all other conditions to the Merger have been met or waived and the Merger Agreement is not terminated. Regardless, if you are in favor of the Merger, you are asked to complete the “Written Consent of Stockholder(s) of Cryptometrics, Inc. In Lieu of Meeting” enclosed herewith and mail it using the pre-addressed envelope provided to you. A form of such written consent is also attached as Appendix A. The address to which to mail the consent is Cryptometrics, Inc., 73 Main Street, Tuckahoe, NY 10707.

To be accepted your written consent must be received by Cryptometrics prior to the Closing, but in any case prior to 20 days after the mailing of this Consent Solicitation/Prospectus.

OWNERSHIP OF JAG MEDIA AFTER THE MERGER

Immediately after the Merger, Cryptometrics stockholders immediately prior to the Merger are entitled to own approximately 394,700,016 shares of JAG Media Common Stock, equivalent to approximately 87% of the outstanding JAG Media Common Stock immediately after the Merger. JAG Media stockholders just prior to the Merger will continue to own approximately 58,508,856 shares of JAG Media Common Stock, equivalent to approximately 13% of the outstanding JAG Media Common Stock immediately after the Merger, as well as 403,249 shares of class B common stock.

ACCOUNTING TREATMENT

The Merger will be accounted for as a “purchase” as such term is used under generally accepted accounting principles in the United States, for accounting and financial reporting purposes. It is anticipated that this transaction will be recorded as a “reverse” acquisition whereby Cryptometrics is treated as the accounting acquirer and JAG Media, the legal acquirer, as the accounting acquiree. The identifiable tangible and intangible assets and the liabilities of JAG Media will be recorded at their fair values. A purchase price valuation has not yet been undertaken by management in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141 “Business Combinations”. Upon closing, management will engage third party experts and such qualified personnel as will be required to make a full valuation to properly allocate the purchase price to the fair value of the identifiable assets acquired and liabilities assumed. The excess of the purchase price over the fair value of the net liabilities to be assumed by Cryptometrics has been preliminarily allocated to a single caption called “Intangible assets — in-process research and development acquired”, but will be adjusted for the valuation, as explained in the unaudited pro forma condensed financial statements herein. The assets and liabilities of Cryptometrics will continue to be recorded at their historical values. The reported financial condition and results of operations of the combined companies after the Merger will reflect these values, but will not be retroactively restated to reflect the historical financial position or results of JAG Media.

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

Counsel to JAG Media has opined, based on representations received from officers of JAG Media and Cryptometrics and on certain assumptions (including the assumption that the Second Step Transaction will occur immediately after the Merger), that the Merger (together with certain related transactions) will qualify as a “reorganization” under Section 368 of the Code for U.S. federal income tax purposes. The representations relied upon include a representation to the effect that, based on values as of the last business day before the closing date for the Merger, the aggregate fair market value of the JAG Media Common Stock and other consideration received by each holder of Cryptometrics Common Stock will be approximately equal to the fair market value of the Cryptometrics Common Stock surrendered by such holder in exchange therefor pursuant to the Merger. Any failure of the assumptions on which such opinion is based to be true or the representations on which such opinion is based to be accurate could cause the conclusions in such opinion to be incorrect. Such opinion is based upon the Code, Treasury regulations thereunder, administrative rulings and court decisions, all as in effect on the date of such opinion, and all of which are subject to change, including changes with retroactive effect and changes that may adversely effect the conclusions reached in such opinion. This discussion is based on currently existing provisions of the Code, existing and proposed treasury regulations thereunder and current administrative rulings and court decisions, all of which are subject to change. Any change, which may or may not be retroactive, could alter the tax consequences to Cryptometrics stockholders as described below. Assuming that the Merger qualifies as a reorganization under Section 368 of the Code, except as noted in the two following paragraphs, the following are the material United States federal income tax considerations relevant to the exchange of shares of Cryptometrics Common Stock for JAG Media Common Stock in the Merger that are generally applicable to the Cryptometrics stockholders:


	•	Cryptometrics stockholders will not recognize any gain or loss upon their receipt of JAG Media Common Stock for their shares of Cryptometrics Common Stock exchanged in the Merger, except to the extent they receive cash for fractional shares.


	•	The aggregate tax basis of the JAG Media stockholder that a holder of Cryptometrics stockholder receives in the Merger will be the same as the aggregate tax basis of the Cryptometrics Common Stock surrendered by such holder in exchange for JAG Media Common Stock, adjusted to take into account the receipt of cash for fractional shares.


	•	The holding period of the JAG Media Common Stock that Cryptometrics stockholders receive in the Merger will include the period for which the Cryptometrics Common Stock surrendered in exchange for the JAG Media Common Stock was considered to be held, if the surrendered Cryptometrics Common Stock is held as a capital asset at the time of the Merger.

Although there is some uncertainty with respect to the treatment of Cryptometrics shareholders that, pursuant to subscription agreements that they have entered into with Cryptometrics, receive JAG Media Common Stock and warrants for their shares of Cryptometrics Common Stock, it is likely that they:


	•	will not recognize any gain or loss upon their receipt of JAG Media Common Stock and warrants for their shares of Cryptometrics Common Stock exchanged in the Merger, except to the extent they receive cash in lieu of fractional shares;


	•	will be required to allocate their tax basis in their Cryptometrics shares between the JAG Media Common Stock and warrants received (as determined without regard to the fact that they will receive cash in lieu of fractional shares) in accordance with the relative fair market values of the JAG Media Common Stock and warrants received; and


	•	will have a holding period in the JAG Media Common Stock and warrants received that includes their holding period in the Cryptometrics Common Stock surrendered, if the Cryptometrics Common Stock is held as a capital asset at the time of the Merger.

It is possible that, as a result of transactions between JAG Media and Cryptometrics prior to the Merger pursuant to which Cryptometrics made certain payments to or on behalf of JAG Media, a portion of the JAG Media Common Stock received by Cryptometrics stockholders will be treated as a distribution received on their Cryptometrics shares, with such distribution being taxable as a dividend to the extent of Cryptometrics’s current or accumulated earnings and profits, as determined for United States federal income tax purposes, and thereafter as a return of basis to the extent thereof and then as gain on a deemed disposition of shares. A Crytometrics stockholder would have an initial tax basis in any shares so treated equal to their value at the time of the Merger and the holding period in such shares shall begin on the day following the Merger. The amount of JAG Media expenses that have been paid by Cryptometrics is currently approximately $810,000, but could increase prior to the Closing of the Merger. JAG Media believes, based on information received from Cryptometrics, that Cryptometrics will not have current or accumulated earnings and profits for U.S. federal income tax purposes as of the Closing of the Merger.

This discussion does not address all United States federal income tax considerations that may be relevant to a particular Cryptometrics stockholder in light of the Cryptometrics stockholders’ specific particular circumstances, such as a Cryptometrics stockholder who or that:


	•	is a dealer in securities;

	•	is a trader in securities that elects to use a mark-to-market method of accounting for its securities holdings;

	•	is a bank;

	•	is a life insurance company;

	•	is a tax-exempt organization;

	•	owns Cryptometrics Common Stock as part of a straddle or conversion transaction for tax purposes;

	•	is subject to the alternative minimum tax provisions of the Code;

	•	is a foreign person;

	•	does not hold Cryptometrics Common Stock as a capital asset;

	•	owns Cryptometrics stock other than Cryptometrics Common Stock; or

	•	acquired Cryptometrics stock in connection with stock option or stock purchase plans or in other compensatory transactions.

In addition, this discussion does not address:


	•	the tax consequences of the Merger under foreign, state or local tax laws;


	•	the tax consequences of the assumption by JAG Media of Cryptometrics stock warrants or the tax consequences of the receipt of rights to acquire JAG Media Common Stock; or


	•	the tax consequences of the Merger to holders of exchangeable shares of Cryptometrics Canada, Inc.

The parties are not requesting and will not request a ruling from the Internal Revenue Service (“IRS”) as to the tax consequences of the Merger. Cryptometrics stockholders should be aware that the tax opinions provided by Morgan, Lewis & Bockius do not and will not bind the IRS. The IRS may therefore successfully assert a contrary opinion. The tax opinions are and will be subject to assumptions, exceptions, limitations and qualifications, including but not limited to the accuracy of representations made by JAG Media and Cryptometrics.

A successful IRS challenge to the reorganization status of the Merger or the failure of the Second Step Transaction to occur would result in a Cryptometrics stockholder recognizing taxable gain or loss with respect to each share of Cryptometrics Common Stock surrendered equal to the difference between (a) each stockholder’s basis in the share and (b) the fair market value, as of the Effective Time, of the JAG Media Common Stock received in exchange. In this event, a Cryptometrics stockholder’s aggregate basis in the JAG Media Common Stock received would equal its fair market value as of the closing date of the Merger, and the stockholder’s holding period for the JAG Media Common Stock would begin the day after the Merger. In the case of a Cryptometrics shareholder that, pursuant to a subscription agreement entered into with Cryptometrics, receives both JAG Media Common Stock and warrants for shares of Cryptometrics Common Stock, the fair market value, as of the Effective Time, of the warrants received would be considered together with the fair market value of the JAG Media Common Stock received in determining the amount of gain or loss, such shareholder’s initial tax basis in the warrants received would equal their fair market value as of the closing date of the Merger and the holding period for the warrants received would begin on the day after the Merger.

CRYPTOMETRICS STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE APPLICABLE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES.

LOSS LIMITATIONS

Pursuant to the Merger, the stock ownership of JAG Media will change to such an extent as to cause its net operating loss (“NOL”) carryforward to be subject to limitation under Section 382 of the Code.

FEDERAL SECURITIES LAWS CONSEQUENCES; STOCK TRANSFER RESTRICTIONS

Upon the issuance of shares of JAG Media Common Stock to the Cryptometrics stockholders in connection with the Merger, such shares shall be registered with the SEC on the Registration Statement on Form S-4 of which this Consent Solicitation/Prospectus forms a part. In accordance with the terms of the Merger Agreement, however, stockholders of Cryptometrics shall not be permitted to sell or otherwise dispose of sixty-five percent (65%) of the JAG Media Common Stock received in the Merger for a period of twelve months from the closing date of the transaction. Additionally, this Registration Statement on Form S-4 shall separately register the shares of JAG Media Common Stock issuable to the current Co-Chief Executive Officers of Cryptometrics, Robert Barra and Michael A. Vitale, and the current Chief Strategy Officer of Cryptometrics, Joel Shaw, so that the shares are immediately saleable subject to the twelve-month lock-up provision. Subject to compliance with all relevant securities laws, thirty-five percent (35%) of the shares of JAG Media Common Stock issued to the Cryptometrics stockholders in connection with the Merger shall not be subject to the twelve-month lock-up provision.

THE MERGER AGREEMENT

The following is a summary of the Merger Agreement (including the Amendments), a copy of each of which is attached as Appendices C-1 through C-12 and each is incorporated into this Consent Solicitation/Prospectus by reference. Stockholders of Cryptometrics are urged to read the Merger Agreement in its entirety for a more complete description of the terms and conditions of the Merger.

The text of the Merger Agreement has been included to provide you with information regarding its terms. The terms of the Merger Agreement (such as the representations and warranties) are intended to govern the contractual rights and relationships, and allocate risks, between the parties in relation to the Merger. The Merger Agreement contains representations and warranties Cryptometrics, JAG Media and Merger Sub made to each other as of specific dates. The representations and warranties were negotiated between the parties with the principal purpose of setting forth their respective rights with respect to their obligation to complete the Merger and may be subject to important limitations and qualifications as set forth therein, including a contractual standard of materiality different from that generally applicable under federal securities laws.

GENERAL

The Merger Agreement provides that Merger Sub, a wholly-owned subsidiary of JAG Media formed under the laws of the State of Delaware for purposes of effecting the transactions contemplated by the Merger Agreement, will merge with and into Cryptometrics, which will thereupon become a wholly-owned subsidiary of JAG Media. Upon completion of the Merger, JAG Media will change its name to “Cryptometrics, Inc.”

TIMING OF CLOSING

The Closing will take place on a date to be specified by the parties to the Merger Agreement which shall occur no later than 2 business days after satisfaction (or waiver) of certain conditions set forth in the Merger Agreement, unless another time is agreed to in writing by the parties. In the Amendments, the parties have tentatively set a closing date of March 7, 2008, or such other date as the parties may agree upon, being so authorized by their respective Boards of Directors. In addition the Amendments provide for an automatic termination of the Merger Agreement on March 31, 2008, unless the parties agree otherwise in writing, as authorized by their respective Boards of Directors. Simultaneously with, or as soon as practicable following, the Closing, Cryptometrics, as the surviving corporation, will file a Certificate of Merger with the Secretary of State of the State of Delaware as provided by Section 252(c) of the Delaware General Corporation Law. The Merger shall become effective at such time as the Certificate of Merger is filed or at such later time as is set forth in the Certificate of Merger (the “Effective Time”).

CONVERSION OF SHARES OF CRYPTOMETRICS COMMON STOCK

At the Effective Time, by virtue of the Merger and without any action on the part of JAG Media, Merger Sub, Cryptometrics or any stockholder of Cryptometrics, holders of shares of Cryptometrics Common Stock issued and outstanding immediately prior to the time the Certificate of Merger is filed with the Delaware Secretary of State, including as outstanding for this purpose the total number of shares of Cryptometrics Common Stock (the “Cryptometrics Exchange Shares”) for which outstanding exchangeable shares of Cryptometrics’ Canadian subsidiary, Cryptometrics Canada, Inc. (the “Exchangeable Shares”), can be exchanged, will be entitled to receive 394,700,016 shares of fully paid and nonassessable JAG Media Common Stock (the “Merger Consideration”).

Holders of Cryptometrics Common Stock will in general receive shares of JAG Media Common Stock in proportion to their holdings of Cryptometrics Common Stock compared to all outstanding shares of Cryptometrics Common Stock (including as outstanding the Cryptometrics Exchange Shares) at the time of the Merger, subject to certain adjustments. A limited number of approximately 50 Cryptometrics stockholders, none of whom are officers or directors of Cryptometrics, holding 779,750 shares of Cryptometrics Common Stock, by virtue of subscription agreements with Cryptometrics, will receive JAG Media shares with an aggregate fixed value of $15,516,250. The subscription agreements of such holders provided that they would be entitled to be issued post merger shares of a merger candidate’s common stock (now JAG Media Common Stock) having a market value based on the opening price of such stock after the Merger on the relevant market (the Pink Sheets in this case) equal to 200% (in the case

of 769,250 such shares) or 125% (in the case of 10,500 such shares) of the amount for which they acquired their Cryptometrics Common Stock, which in each instance was $10.00 per share. The number of such shares of JAG Media Common Stock will be determined after the first day of trading following the Merger so that all Cryptometrics stockholders receive ownership of the correct number of shares. They will be entitled to own shares of the merger candidate’s common stock (now JAG Media Common Stock) with fixed aggregate values following the effectiveness of the Merger (based on the post-merger opening price on the Pink Sheets) of $15,385,000 in the case of 769,250 shares of Cryptometrics Common Stock and $131,250 in the case of 10,500 shares of Cryptometrics Common Stock, regardless of the actual market price of the shares of JAG Media Common Stock following the Merger.

The remaining number of shares of JAG Media Common Stock available to other stockholders of Cryptometrics will then be shared by such other stockholders pro rata to the number of shares held by each compared to the aggregate number shares of Cryptometrics Common Stock (including the Cryptometrics Exchange Shares) held by all of such other stockholders (including the holders of the Exchangeable Shares).

Each outstanding share of Cryptometrics Common Stock (including the Cryptometrics Exchangeable Shares) at Closing, other than the 779,750 shares described above, shall be converted into the right to receive and become exchangeable for the number of shares of JAG Media Common Stock represented by the following quotient:

394,700,016 less the aggregate number of shares of JAG Media Common Stock for which the 779,750 shares of Cryptometrics noted above are by contract to be exchanged

- divided by -

The total number of outstanding Shares of Cryptometrics Common Stock (including the Cryptometrics Exchangeable Shares) at Closing less 779,750 shares of Cryptometrics Common Stock

Such quotient is referred to as the “Exchange Multiple.”

For example, assuming the post-Merger opening sales price of the Jag Media Common Stock on the Pink Sheets were $1.00 per share, if one of the holders of the special 779,750 shares acquired 100 shares for $1,000, such stockholder would be entitled to own 2,000 shares (200%) or 1,250 shares (125%) of JAG Media Common Stock. All of the holders of the special 779,750 shares of Cryptometrics Common Stock would receive an aggregate of 15,516,250 shares of JAG Media Common Stock, at such assumed price of $1.00 per share. In such case 379,183,766 shares of JAG Media Common Stock would be left to be shared pro rata by all remaining Cryptometrics shareholders holding approximately 11,202,000 shares of Cryptometrics Common Stock (including the Cryptometrics Exchangeable Shares) as of April 30, 2007, who would therefore receive approximately 33.8 shares of JAG Media Common Stock for each share of Cryptometrics Common Stock.

No fractional shares of JAG Media Common Stock shall be issued in connection with the Merger. Unless the value of the fractional shares of JAG Media Common Stock which otherwise would have been issued by virtue of the Merger to a Cryptometrics stockholder exceeds an aggregate cash amount of One Dollar ($1.00), such Cryptometrics stockholder shall not be entitled to receive a cash payment in lieu of a fractional share of JAG Media Common Stock. In the event that the value of the fractional share of JAG Media Common Stock which otherwise would have been issued by virtue of the Merger to a Cryptometrics stockholder exceeds One Dollar ($1.00), any such Cryptometrics stockholder entitled to receive a fractional share of JAG Media Common Stock will be entitled to receive a cash payment in lieu of such fractional share in an amount determined by JAG Media to be equal to such fraction multiplied by the arithmetic mean of the closing prices of JAG Media Common Stock on the Pink Sheets over the 20 trading days ending three trading days prior to the closing date of the transaction.

Upon issuance of the shares of JAG Media Common Stock to the Cryptometrics stockholders in connection with the Merger, such shares shall be registered with the SEC on a Registration Statement on Form S-4 of which this Consent Solicitation/Prospectus forms a part. In accordance with the terms of the Merger Agreement, however, stockholders of Cryptometrics shall not be permitted to sell or otherwise dispose of sixty-five percent (65%) of the JAG Media Common Stock received in connection with the Merger for a period of twelve months from the closing date of the transaction. Subject to compliance with all relevant securities laws, thirty-five percent (35%) of the

shares of JAG Media Common Stock issued to the Cryptometrics stockholders in connection with the Merger shall not be subject to the twelve month lock-up provision.

The Form S-4 also registers the JAG Media shares for which outstanding options and warrants of Cryptometrics (including options and warrants for outstanding for Exchange Shares of Cryptometrics’ Canadian subsidiary, Cryptometrics Canada, Inc.) may be exercised immediately after the Merger. Additionally, the Form S-4 separately registers the resale of the shares of JAG Media Common Stock issuable in connection with the Merger to the current Co-Chief Executive Officers of Cryptometrics, Robert Barra and Michael A. Vitale, and the current Chief Strategy Officer of Cryptometrics, Joel Shaw, so that such shares are immediately saleable by them subject to the twelve month lock-up restriction noted above.

Each share of Cryptometrics Common Stock held in the Cryptometrics’ treasury immediately prior to the Effective Time and each share owned by any subsidiary of Cryptometrics shall not represent the right to receive any Merger Consideration, and each such share shall be canceled and retired and shall cease to exist, and no cash, securities or other property shall be payable in respect thereof.

If between the date of the Merger Agreement and the Effective Time, there shall be any stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares or any similar event with respect to Cryptometrics Common Stock or JAG Media Common Stock, the numbers of shares and any other amounts payable pursuant to the Merger Agreement shall be correspondingly adjusted to the extent appropriate to reflect such stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares or similar event.

CONVERSION OF SHARES OF MERGER SUB COMMON STOCK

Each share of common stock of Merger Sub, par value $0.001 per share, issued and outstanding immediately prior to the Effective Time shall be converted into and become one fully paid and nonassessable share of common stock, par value $0.001 per share of Cryptometrics. All of such shares will be owned by JAG Media (which will be renamed Cryptometrics).

TREATMENT OF CRYPTOMETRICS STOCK OPTIONS

At the Effective time, each outstanding option (“Cryptometrics Stock Option”) to purchase shares of Cryptometrics Common Stock issued, will, by virtue of the Merger and without further action on the part of Cryptometrics or the holder of the Cryptometrics Stock Option, be assumed by JAG Media (each a “Replacement Option”). To the extent that Replacement Options replace options which qualify as “incentive stock options,” each Replacement Option will be intended to qualify as an “incentive stock option” under the Internal Revenue Code. JAG Media, however, makes no representation and warranty that such option will qualify as such under the Internal Revenue Code.

Each Replacement Option will be subject to the same terms and conditions as the applicable Cryptometrics Stock Option it replaced, provided that the Cryptometrics Stock Option does not otherwise provide, except that (i) each such Replacement Option shall be exercisable for, and represent the right to acquire, that whole number of shares of JAG Media Common Stock (rounded down to the nearest whole share) equal to the number of shares of Cryptometrics Common Stock subject to such Company Stock Option multiplied by the Exchange Multiple, and (ii) the exercise price per share of JAG Media Common Stock shall be an amount equal to the exercise price per share of the shares of Cryptometrics Common Stock subject to such Cryptometrics Stock Option in effect immediately prior to the Effective Time divided by the Exchange Multiple (the exercise price per share, as so determined, being rounded up to the nearest full cent).

After the Closing, JAG Media will reserve for issuance a sufficient number of shares of JAG Media Common Stock for delivery upon exercise of the Replacement Options.

TREATMENT OF CRYPTOMETRICS WARRANTS

At the Effective Time, each outstanding warrant to purchase shares of Cryptometrics Common Stock (each, a “Cryptometrics Warrant”) will, to the extent that such Cryptometrics Warrant does not expire in accordance with its

terms upon consummation of the Merger, be converted into a warrant to acquire, on the same terms and conditions as were applicable under such Cryptometrics Warrant, provided that the Cryptometrics warrant does not otherwise provide, that number of shares of JAG Media Common Stock (rounded down to the nearest whole share) equal to the number of shares of Cryptometrics Common Stock subject to such Cryptometrics Warrant multiplied by the Exchange Multiple (such new warrant, the “Replacement Warrant”), at an exercise price per share (rounded up to the nearest whole cent) equal to (y) the exercise price per share of Cryptometrics Common Stock subject to such Cryptometrics Warrant divided by (z) the Exchange Multiple.

Any restriction on exercise of any Cryptometrics Warrant will continue in full force and effect and the term, exercisability, schedule and other provisions of such Cryptometrics Warrant will continue in full force and effect.

At or prior to the Effective Time, Cryptometrics will take all reasonable action necessary with respect to each Cryptometrics Warrant to permit the replacement of such Cryptometrics Warrant by JAG Media and to ensure that holders of Cryptometrics Warrants have no rights with respect to their Cryptometrics Warrants held greater than those specifically provided for in the Merger Agreement.

TREATMENT OF EXCHANGEABLE SHARES

At the Effective Time, each outstanding Exchangeable Share will be converted into the right to acquire, on the same terms and conditions as were applicable under such Exchangeable Share, provided the relevant Exchangeable Share does not otherwise provide, that number of shares of JAG Media Common Stock (rounded down to the nearest whole share) equal to the number of shares of Cryptometrics Common Stock subject to such Exchangeable Share multiplied by the Exchange Multiple. Any restriction on exercise of any Exchangeable Share shall continue in full force and effect and the term, exchangeability, schedule and other provisions of such Exchangeable Share will continue in full force and effect. At or prior to the Effective Time, Cryptometrics, Cryptometrics Canada, Inc. and JAG Media will take all reasonable action, if any, necessary with respect to each Exchangeable Share to permit the proper modifications of such Exchangeable Share by Cryptometrics, Cryptometrics Canada, Inc. and JAG Media and any agreements relating to the Exchangeable Shares so as to ensure that holders of Exchangeable Shares have no rights with respect thereto greater or lesser than those specifically provided the Merger Agreements and any additional agreements made in connection with the Exchangeable Shares. The holder of each Exchangeable Share is entitled, pre-merger, to exchange that share for one share of Cryptometrics Common Stock. This ratio is subject to appropriate adjustment if there is any recapitalization of Cryptometrics.

EXCHANGE OF SHARES OF CRYPTOMETRICS COMMON STOCK AND SURRENDER OF STOCK CERTIFICATES

Following the execution of the Merger Agreement, JAG Media will enter into an agreement with Transfer Online, Inc., or such other bank or trust company of recognized standing that may be designated by JAG Media and is reasonably satisfactory to Cryptometrics (the “Exchange Agent”). Upon the receipt of the approval of the principal stockholders of Cryptometrics, JAG Media will deposit, or will cause to be deposited, with the Exchange Agent, for the benefit of the holders of Cryptometrics Common Stock, certificates representing the shares of JAG Media Common Stock issuable to holders of Cryptometrics Common Stock as of the Effective Time in respect of the Cryptometrics Common Stock. JAG Media shall also deposit with the Exchange Agent cash in an amount sufficient to make the payments in lieu of fractional shares. The certificates, together with any cash in dividends or distributions with respect to the certificates and any cash made available in lieu of fractional shares are referred to herein and in the Merger Agreement as the “Exchange Fund”.

In order to expedite the necessary share exchange, Cryptometrics is arranging with the Exchange Agent for a new Direct Registration System to be established. It will reflect the number of shares of JAG Media Common Stock to which each Cryptometrics stockholder is entitled, including an indication of which shares can be sold immediately (35%) and which cannot (65%). If the Merger is completed, a statement of holdings with such information will be mailed to each stockholder. This statement can be provided to a broker who can then request electronic delivery of free trading positions.

Alternatively, Cryptometrics stockholders can be sent written instructions for exchanging their stock certificates to obtain physical stock certificates for the JAG Media shares of Common Stock to which they are entitled.

Cryptometrics stockholders should note that this will be a longer procedure. If, however, any Cryptometrics stockholder so requests, JAG Media will cause the Exchange Agent to mail to each holder of record of Cryptometrics Common Stock a letter of transmittal and instructions (specifying that delivery will be effected, and the risk of loss and title to the Cryptometrics Common Stock shall pass, only upon proper delivery of the certificates representing the Cryptometrics Common Stock (the “Certificates”) to the Exchange Agent) for use in exchanging Cryptometrics Common Stock for the Merger Consideration payable in respect of such Cryptometrics Common Stock.

Upon surrender to the Exchange Agent of a Certificate for cancellation, together with such letter of transmittal duly executed and completed in accordance with its instructions and such other documents as may be reasonably required pursuant the instructions, the holder of such Cryptometrics Common Stock will be entitled to receive (i) that number of whole shares of JAG Media Common Stock to which the holder of the Cryptometrics Common Stock is entitled, (ii) payment in lieu of fractional shares which such holder is entitled to receive in the event the fractional shares of JAG Media Common Stock to be issued by virtue of the Merger to Cryptometrics stockholders exceeds an aggregate cash amount of One Dollar ($1.00), and (iii) and any dividends or distributions payable to the holder. The Certificate so surrendered for with shall then be canceled.

In the event of a transfer of Cryptometrics Common Stock that is not registered in the transfer records of the Cryptometrics, shares of JAG Media Common Stock issued in exchange for Cryptometrics Common Stock may be issued to a person other than the person in whose name the surrendered Certificate is surrendered, if (i) such shares are permitted to be transferred, and (ii) such Certificate is properly endorsed or is otherwise in proper form for transfer and (iii) the person requesting such issuance pays to the Exchange Agent any and all taxes required as a result of the issuance to a person other than the registered holder of the Certificate or establishes by evidence satisfactory to the Exchange Agent that any such taxes have been paid or are not payable.

Until surrendered or transferred as contemplated, each Certificate (other than Certificates held by holders of Cryptometrics Common Stock seeking appraisal rights) shall represent at all times after the Effective Time solely the right to receive, upon such surrender or transfer, in accordance with the terms of the Merger Agreement, the Merger Consideration, together with cash payments in lieu of fractional shares and dividends and distributions payable to the holder in respect of the Cryptometrics Common Stock represented by the Certificate.

All shares of JAG Media Common Stock issued in accordance with the terms of the Merger Agreement (including all cash payments in lieu of fractional shares or dividends and distributions payable to holders of Cryptometrics Common Stock) upon surrender of the Certificates in accordance with the Merger Agreement shall be deemed to have been paid in full satisfaction of all rights pertaining to the Cryptometrics Common Stock represented by Certificates.

At the close of business at 5:00 PM on the day immediately preceding the Effective Time, the stock transfer books of Cryptometrics will be closed and there will be no further registration of transfers of Cryptometrics Common Stock. From and after the Effective Time, the holders of Cryptometrics Common Stock shall cease to have any rights with respect to shares of Cryptometrics Common Stock outstanding immediately prior to the Effective Time, except as otherwise provided to holders of Cryptometrics Common Stock who exercise their appraisal rights or by applicable law.

On or after the Effective Time, any Certificates presented to the Exchange Agent or JAG Media for any reason shall be canceled and exchanged for the Merger Consideration and any cash amounts payable in lieu of fractional shares or dividends or distributions payable to the holders of Cryptometrics Common Stock.

Any portion of the Exchange Fund that remains undistributed to the holders of Cryptometrics Common Stock for 6 months after the Effective Time shall be redelivered to JAG Media, and any holders of Cryptometrics Common Stock who have not exchanged their shares of Cryptometrics Common Stock for JAG Media Common Stock in accordance with the terms provided by the Merger Agreement, shall thereafter look only to JAG Media for the Merger Consideration to which they are entitled, in addition to any cash amounts payable in lieu of fractional shares or dividends or distributions payable to them as holders of Cryptometrics Common Stock.

Any portion of the Exchange Fund remaining unclaimed by holders of Cryptometrics Common Stock as of a date that is immediately prior to such time as such amounts would otherwise escheat to or become property of any

government entity shall, to the extent permitted by applicable law, become the property of JAG Media free and clear of any claims or interest of any person previously entitled thereto. To the fullest extent permitted by applicable law, neither JAG Media nor Cryptometrics, shall be liable to any holders of Cryptometrics Common Stock for shares of JAG Media Common Stock, cash or other property delivered from the Exchange Fund to a public official pursuant to any applicable abandoned property, escheat or similar law.

Each person entitled to receive shares of JAG Media Common Stock shall receive them on the condition and subject to the requirement that (A) 65% of such shares may not be sold (but may be transferred (i) by gift to a family member, (ii) by will or by the laws of descent or distribution or (iii) to a trust for the benefit of the transferor and/or member of his family) until the first anniversary of the closing date and the certificates evidencing such shares shall have a legend reflecting such restriction, and (B) the remaining 35% of such shares may be freely sold or transferred even within the first year following the closing date. Cryptometrics shall have the right to impose a stop order on the transfer of all such shares described in (A) still held by shareholders of Cryptometrics as of the closing date for the remainder of such first year.

No dividends or other distributions on shares of JAG Media Common Stock will be paid with respect to any shares of Cryptometrics Common Stock until such share of Cryptometrics Common Stock is surrendered or exchanged as provided herein and by the terms of the Merger Agreement.

No holder of Cryptometrics Common Stock will be entitled, until the exchange of such shares, to vote the shares of JAG Media Common Stock, which such holder has the right to receive pursuant to the terms of the Merger Agreement.

The payment of the Merger Consideration in respect of each share of Cryptometrics Common Stock (and any cash payments in lieu of fractional shares or dividends and distributions payable with respect to each share of Cryptometrics Common Stock) will be deemed to have been issued and fully paid in full satisfaction of all rights pertaining to each such share of Cryptometrics Common Stock, and there will be no further registration of transfers on the stock transfer books of Cryptometrics of Cryptometrics Common Stock which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented for transfer to Cryptometrics, such Certificates will be canceled.

LOST, STOLEN OR DESTROYED CERTIFICATES

If any Certificate is lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed, and if required by Cryptometrics or the Exchange Agent, the posting by such person of a bond, in such reasonable amount as Cryptometrics, as the surviving corporation, or the Exchange Agent may direct, as indemnity against any claim that may be made against it with respect to such Certificate and the payment of any fee charged by the Exchange Agent for such service, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate, the number of shares of JAG Media Common Stock and cash, if any, to which the holder is entitled pursuant to the Merger Consideration and applicable Exchange Ratio set forth in the Merger Agreement.

APPRAISAL RIGHTS

Any shares of Cryptometrics Common Stock held by a Cryptometrics stockholder who has demanded and not lost or withdrawn, or who is eligible to demand, appraisal rights with respect to such shares of Cryptometrics Common Stock in the manner provided in the Delaware General Corporation Law (see Appendix D hereto) does not represent the right to receive any portion of the Merger Consideration. If any Cryptometrics stockholder fails to perfect or effectively withdraws or loses his right to appraisal and payment under the Delaware General Corporation Law, as the case may be, each share of Cryptometrics Common Stock held by such Cryptometrics stockholder will represent the right to receive its portion of the Merger Consideration.

Both Cryptometrics and JAG Media, as the case may be, shall give one another prompt notice of any demands for appraisal received by Cryptometrics or JAG Media, withdrawals of such demands, and any other communications received by Cryptometrics or JAG Media in connection with any demands for appraisal. Cryptometrics may

voluntarily make any payment with respect to any such demands. Cryptometrics shall have the right to control all negotiations and proceedings with respect to demands for appraisal, including the right to settle any such demands.

TERMS OF JAG MEDIA FINANCING

JAG Media entered into letter agreements with YA Global Investments, L.P. (formerly known as Cornell Capital Partners, LP), Cryptometrics and Robert Barra and Michael Vitale, dated January 24, 2007, February 26, 2007, April 2, 2007, April 20, 2007, May 11, 2007, May 18, 2007, June 15, 2007, July 16, 2007, September 10, 2007 and November 7, 2007, all of which expired in accordance with the terms of the November 7, 2007 amendment on December 15, 2007. On January 31, 2008, JAG Media entered into a new letter agreement with YA Global pursuant to which YA Global on January 31, 2008 converted the remaining outstanding principal amount of JAG Media’s convertible debentures, as well as all accrued interest on such debentures, into JAG Media Common Stock and exercised a warrant for 700,000 shares of JAG Media Common Stock, providing JAG Media with $280,000 in cash proceeds. In addition, such new letter agreement amended the outstanding warrants to purchase 11,300,000 shares of JAG Media Common Stock so that their respective first exercise dates will be 30 trading days following the Closing of the Merger, March 31, 2008, June 30, 2008, September 30, 2008 and December 31, 2008 and amended the exercise price of the warrants to be 88% of the average of the Volume Weighted Average Price of JAG Media’s Common Stock as quoted by Bloomberg during the 30 days immediately prior to the first date upon which each warrant may be exercised. Such amendments to the warrants will become ineffective on February 27, 2008 if the Closing of the Merger has not yet occurred by that date, unless the parties agree to extend such date.

The January 31, 2008 letter agreement is included as Exhibit 10.36 to the Registration Statement of which this Consent Solicitation/Prospectus forms a part and should be reviewed for further information regarding its terms.

THE BOARD OF DIRECTORS AND OFFICERS OF JAG MEDIA AFTER THE MERGER

At the Effective Time, the directors of Cryptometrics immediately prior to the Effective Time shall be elected the directors of JAG Media (to be renamed Cryptometrics, Inc.), each to hold office until their respective death, permanent disability, resignation or removal or until their respective successors are duly elected and qualified, all in accordance with the Certificate of Incorporation and Bylaws of JAG Media (to be renamed Cryptometrics) and applicable law. The new directors of JAG Media (to be renamed Cryptometrics, Inc.) will then elect the new officers of such company.

THE CERTIFICATE OF INCORPORATION AND BYLAWS OF JAG MEDIA AFTER THE MERGER

The Certificate of Incorporation of JAG Media shall continue in full force and effect after the Merger, until amended thereafter in accordance with applicable law. It shall be promptly amended after the Effective Time to reflect the new name of “Cryptometrics, Inc.”

The Bylaws of JAG Media (to renamed Cryptometrics, Inc.) shall continue to be the Bylaws of Cryptometrics, Inc. until amended thereafter in accordance with applicable law.

CLOSING PROCEDURES

Pursuant to the Amendment dated January 24, 2007, the parties to the Merger Agreement agreed among other things on various mechanics related to the consummation of the Merger. In particular, after JAG Media receives a copy of the consent of a majority of the Cryptometrics stockholders, JAG Media will (a) rescind the amendment previously made to its Bylaws, thereby eliminating certain corporate governance requirements not yet required of JAG Media; (b) cause to be formed a new limited liability company into which Cryptometrics, Inc. can be merged after the Merger with Cryptometrics Acquisition, Inc. and (c) cause its attorneys to prepare the certificates of merger for the Merger and the Second Step Transaction described in (b) together with related resolutions or written consents, and provide a bring down of their tax opinion at closing.

The parties also agree to establish an escrow for the Closing with Karlen & Stolzar, LLP counsel to Cryptometrics, acting as the escrow agent. JAG Media is to deliver into such escrow within three business days after the effective date of the Registration Statement on Form S-4 of which this Consent Solicitation/Prospectus

forms a part: (i) the documents in connection with the formation of the limited liability company referred to in (b) in the above paragraph; (ii) the certificate of merger for the Merger; (iii) the relevant resolutions or written consents approving the Merger Agreement; (iv) a written consent electing Robert Barra and Michael Vitale as the sole members of the Board of Directors of JAG Media upon the effectiveness of the Merger; (v) resignations of Thomas J. Mazzarissi and Stephen J. Schoepfer from their positions as directors, officers and members of JAG Media and its subsidiaries effective upon the Merger; and (vi) the rescinded Bylaw amendment referred to in (a) in the above paragraph. Cryptometrics has agreed to deliver into Escrow any Affiliate Agreements required to be delivered pursuant to the Merger Agreement. The escrow agent shall hold the documents in escrow until the Merger Agreement is terminated by either JAG Media or Cryptometrics or the occurrence of the then automatic termination date agreed by the parties (currently March 31, 2008) or, if sooner, the escrow agent receives a written notice from Cryptometrics notifying JAG Media and escrow agent that Cryptometrics has elected to proceed with the Closing and instructing the escrow agent to make the relevant filings to effect the Merger.

Promptly after the Effective Time of the Merger, JAG Media is required by the Merger Agreement to (a) amend Section 11 of the existing employment agreements of its prior officers to fix the payout period on termination without cause at 12 months, (b) amend Section 4 of such employment agreement to cancel all options granted to the officers pursuant to such section and (c) amend Section 6 of such employment agreements to reduce the options granted to each of the officers upon a change in control from 1,000,000 to 750,000 shares of JAG Media Common Stock, which will be exercisable immediately on a cashless basis, with one half of such shares being subject to a lock up period of one year from the date of the Closing of the Merger, (iv) assign such employment agreements to Pixaya LLC and cause it to accept same, and such officers will release JAG Media from all liability thereunder (including salary payments) except that JAG Media will remain contractually obligated to carry out its obligations to fulfill any exercise of options remaining under such employment agreements, (b) cause Pixaya LLC to terminate the employment of such officers under such employment agreements without cause, and (c) the Board of Directors of JAG Media will elect new officers of JAG Media through the action of its Board of Directors. Pursuant to the amended and restated employment agreements of Thomas J. Mazzarisi and Stephen J. Schoepfer entered into as of August 31, 2001 between each of Messrs. Mazzarisi and Schoepfer and JAG Media each of Messrs. Mazzarisi and Schoepfer were originally entitled to receive options to purchase 1,000,000 shares of JAG Media Common Stock upon a change in control of JAG Media at an exercise price equal to the fair market value of JAG Media Common Stock prior to such change in control. The options were to be fully vested and immediately exercisable in full.

REPRESENTATIONS AND WARRANTIES

The Merger Agreement contains customary, mutual representations and warranties of JAG Media Merger Sub and Cryptometrics (see also “Disclosure Schedules” below), relating to, among other things:


	•	corporate organization, power and authority;

	•	corporate authorization;

	•	non-contravention;

	•	third party consents;

	•	authorized and issued capital stock, options and warrants;

	•	subsidiaries;

	•	SEC filings and NASDAQ Capital Market listing (in the case of JAG Media only);

	•	financial statements;

	•	no undisclosed liabilities;

	•	absence of certain changes;

	•	personal property, including title to and condition of personal property;

	•	real property, including title to or leaseholder interests in real property as well as condition of real property and environmental matters;


	•	intellectual property;

	•	licenses, permits and other authorizations;

	•	contracts;

	•	insurance;

	•	related party transactions;

	•	investigation and litigation;

	•	brokers and finders;

	•	compliance with applicable laws;

	•	tax matters;

	•	employee benefits;

	•	anti-take over statutes


	•	no illegal payments

	•	labor and employment law matters; and

	•	adequacy of disclosure.

The Merger Agreement also contains representations and warranties made severally, and not jointly, by Robert Barra and Michael A. Vitale, the principal stockholders (the “Principal Stockholders”) of Cryptometrics to JAG Media and Merger Sub, relating to, among other things,


	•	authority to enter into the Merger Agreement, the Voting Agreement and the Lock Up Agreement;

	•	execution and enforceability of the Merger Agreement, the Voting Agreement and the Lock Up Agreement;

	•	title to their securities held in Cryptometrics;

	•	no conflicts with respect to the execution and enforceability of the Merger Agreement, the Voting Agreement and the Lock-Up Agreement;

	•	government approvals and necessary filings;

	•	legal proceedings; and

	•	brokers and finders.

CERTAIN COVENANTS

Both JAG Media and Cryptometrics have agreed that the Merger Agreement may be terminated by either party without giving any reason therefor, unless otherwise agreed to by the parties. In the event that JAG Media and Cryptometrics mutually agreed that the Merger Agreement should no longer be terminable by either party without giving reason therefor, the following affirmative and negative covenants shall become binding upon the parties. Notwithstanding the foregoing however, JAG Media shall notify Cryptometrics and Cryptometrics shall notify JAG Media within two (2) business days after either one of them permits, allows or otherwise causes to occur any event in violation of their respective covenants below. In the event that JAG Media decides to engage in a spin off of assets to its shareholders as a dividend, JAG Media shall inform Cryptometrics of the relevant terms and conditions of the spin off at least two (2) business days prior to the consummation of the spin off.

Affirmative Covenants Concerning Cryptometrics

During the period from the date of the Merger Agreement and continuing until the earlier of the termination of the Merger Agreement or the Effective Time, Cryptometrics has agreed that it will cause Cryptometrics and any of its subsidiaries to:


	•	carry on its business in the usual, regular and ordinary course in a manner consistent with past practice;

	•	use its reasonable best efforts consistent with past practices and policies to preserve intact its present business organization, keep available the services of its present employees and preserve its relationships with customers, suppliers, distributors, licensors, licensees, and others having business dealings with it; and

	•	use its reasonable best efforts to conduct its business in such a manner that on the closing date the representations and warranties of Cryptometrics contained in the Merger Agreement shall be true and correct, as though such representations and warranties were made on and as of such date, and Cryptometrics shall use its reasonable best efforts to cause all of the conditions to the obligations of JAG Media and Merger Sub under the Merger Agreement to be satisfied as soon as practicable following the closing date.

Negative Covenants Concerning Cryptometrics

Except as expressly provided in the Merger Agreement, Cryptometrics has agreed that it will not, and will not permit any of its subsidiaries to, without the prior written consent of JAG Media:


	•	adopt or propose any amendment to the charter documents of Cryptometrics or any of its subsidiaries;

	•	declare, set aside or pay any dividend or other distribution (whether in cash, stock or other property) with respect to any securities;

	•	issue or authorize for issuance any stock dividends or engage in any subdivision, reclassification, split, combination or exchange of shares or any similar event with respect to Cryptometrics Common Stock between the closing date and the Effective Time;

	•	make any change in any issued and outstanding securities, or redeem, purchase or otherwise acquire any securities other than the repurchase at cost from employees of shares of Cryptometrics Common Stock in connection with the termination of their employment pursuant to the Cryptometrics standard form of option/restricted shares agreement;

	•	other than pursuant to a written agreement or the Cryptometrics Benefit Plan disclosed on Cryptometrics’ disclosure schedule (the “Cryptometrics Disclosure Schedule”) to the Merger Agreement in the amount required under the Cryptometrics Benefit Plan and other than payment of bonuses and increases in salaries or wage rates or fringe benefits to non-officer employees, contractors or consultants in the ordinary course of business consistent with past practice, (i) modify the compensation or benefits payable or to become payable by Cryptometrics or any of its subsidiaries to any of its current or former directors, officers, employees, contractors or consultants, or (ii) modify any bonus, severance, termination, pension, insurance or other employee benefit plan, payment or arrangement made to, for or with any current or former directors, employees, contractors or consultants of Cryptometrics or any of its subsidiaries;

	•	enter into any employment (other than offer letters and letter agreements entered into in the ordinary course of business consistent with past practice with employees who are terminable “at-will”), severance or termination agreement;

	•	establish, adopt, enter into, amend or terminate any Cryptometrics Benefit Plan or any collective bargaining, thrift, compensation or other plan, agreement, trust, fund, policy or arrangement for the benefit of any current or former directors, employees, contractors or consultants of Cryptometrics or any of its subsidiaries;

	•	other than (i) sales of inventory, (i) the grant of Cryptometrics Out-Bound Licenses on a non-exclusive basis and (iii) other dispositions of property and assets that are not material, individually or in the aggregate, to Cryptometrics and its subsidiaries, taken as a whole, in each case in the ordinary course of business


		consistent with past practice, sell, lease, transfer or assign any property or assets of Cryptometrics or any of its subsidiaries;


	•	other than borrowings in the ordinary course of business consistent with past practice pursuant to credit facilities existing on the closing date or the financing of ordinary course trade payables consistent with past practice, (i) assume, incur or guarantee any indebtedness, other than endorsements for collection in the ordinary course of business or (ii) modify the terms of any existing indebtedness in any material respect;

	•	other than liens granted pursuant to credit facilities existing on the closing date in connection with borrowings permitted under the previous bullet point, pledge or permit to become subject to liens any properties or assets of Cryptometrics or any of its subsidiaries;

	•	other than travel loans or advances in the ordinary course of business consistent with past practice, make any loans, advances or capital contributions to, or investments in, any other person;

	•	not cancel any debts or waive any claims or rights of substantial value;

	•	other than in the ordinary course of business consistent with past practice, (i) amend, modify or terminate, or waive, release or assign any rights under, any of Cryptometrics’ material contracts, or (ii) enter into any contracts which, if entered into prior to closing date, would have been required to be set forth in the list of materials contracts set forth on the Cryptometrics Disclosure Schedule to the Merger Agreement;

	•	acquire, or agree to acquire, from any person any assets, operations, business or securities or engage in, or agree to engage in, any Merger, consolidation or other business combination with any person, except in connection with (i) capital expenditures permitted under the Merger Agreement or (ii) acquisitions of inventory and other tangible assets in the ordinary course of business consistent with past practice;

	•	not settle or compromise any litigation other than settlements or compromises of litigation where the settlement is limited solely to the release of claims and the monetary payment by Cryptometrics or its subsidiaries does not exceed $50,000 in the aggregate or $10,000 in any individual case;

	•	amend any Cryptometrics Stock Option, Cryptometrics Warrant or other documentation evidencing a right to purchase Cryptometrics securities or authorize cash payments in exchange for any of the foregoing;

	•	make any filings or registrations, with any governmental entity, except routine filings and registrations made in the ordinary course of business;

	•	take any actions outside the ordinary course of business;

	•	other than as required by GAAP (as advised by its regular independent accountants), make any changes in its accounting methods, principles or practices;

	•	make any tax election, change its method of tax accounting or settle any claim relating to taxes;

	•	take any action or omit to do any act within its reasonable control which action or omission which is reasonably likely to result in any of the conditions to the Merger not being satisfied, except as may be required by applicable law; or

	•	agree, whether in writing or otherwise, to do any of the foregoing.

Affirmative Covenants Concerning JAG Media

During the period from the date of the Merger Agreement and continuing until the earlier of the termination of the Merger Agreement or the Effective Time, JAG Media has agreed that it will cause JAG Media and any of its subsidiaries to:


	•	carry on its business in the usual, regular and ordinary course in a manner consistent with past practice;

	•	use its reasonable best efforts consistent with past practices and policies to preserve intact its present business organization, keep available the services of its present employees and preserve its relationships with customers, suppliers, distributors, licensors, licensees, and others having business dealings with it; and


	•	use its reasonable best efforts to conduct its business in such a manner that on the closing date the representations and warranties of JAG Media contained in the Merger Agreement shall be true and correct, as though such representations and warranties were made on and as of such date, and JAG Media shall use its reasonable best efforts to cause all of the conditions to the obligations of Cryptometrics under the Merger Agreement to be satisfied as soon as practicable following the closing date.

Negative Covenants Concerning JAG Media and Pixaya LLC

Except as expressly provided in the Merger Agreement, JAG Media and its wholly-owned subsidiary Pixaya LLC, have agreed that they will not, without the prior written consent of Cryptometrics:


	•	adopt or propose any amendment to the charter documents of JAG Media or any of its subsidiaries;

	•	declare, set aside or pay any dividend or other distribution (whether in cash, stock or other property) with respect to any securities;

	•	issue any stock dividends or engage in any subdivision, reclassification, recapitalization, split, combination or exchange of shares or any similar event with respect to JAG Media Common Stock between the closing date and the Effective Time;

	•	make any change in any issued and outstanding securities, or redeem, purchase or otherwise acquire any securities other than the repurchase at cost from employees of shares of JAG Media Common Stock in connection with the termination of their employment pursuant to JAG Media’s standard form of option/restricted shares agreement or a cancellation of issued shares at no cost to JAG Media;

	•	other than pursuant to a written agreement in the amount required thereunder and other than payment of bonuses and increases in salaries or wage rates or fringe benefits to non-officer employees, contractors or consultants in the ordinary course of business consistent with past practice, (i) modify the compensation or benefits payable or to become payable by JAG Media or any of its subsidiaries to any of its current or former directors, officers, employees, contractors or consultants, (ii) modify any bonus, severance, termination, pension, insurance or other employee benefit plan, payment or arrangement made to, for or with any current or former directors, employees, contractors or consultants of JAG Media or any of its subsidiaries or (iii) enter into any employment (other than offer letters and letter agreements entered into in the ordinary course of business consistent with past practice with employees who are terminable “at-will”), severance or termination agreement;

	•	establish, adopt, enter into, amend or terminate any employee benefit plan or any collective bargaining, thrift, compensation or other plan, agreement, trust, fund, policy or arrangement for the benefit of any current or former directors, employees, contractors or consultants of JAG Media or any of its subsidiaries;

	•	other than (i) sales of inventory, (ii) the grant of licenses, sublicenses and other contracts pursuant to which JAG Media or any of its subsidiaries authorizes a third party to use or practice any rights under, or grant sublicenses with respect to, intellectual property owned by JAG Media on a non-exclusive basis and (iii) other dispositions of property and assets that are not material, individually or in the aggregate, to JAG Media and its subsidiaries, taken as a whole, in each case in the ordinary course of business consistent with past practice, sell, lease, transfer or assign any property or assets of JAG Media or any of its subsidiaries;

	•	other than borrowings in the ordinary course of business consistent with past practice pursuant to credit facilities existing on the date of this Agreement or the financing of ordinary course trade payables consistent with past practice, (i) assume, incur or guarantee any indebtedness, other than endorsements for collection in the ordinary course of business or (ii) modify the terms of any existing indebtedness in any material respect;

	•	other than liens granted pursuant to credit facilities existing on the date of closing date in connection with borrowings permitted under the previous bullet point, pledge or permit to become subject to liens any properties or assets of JAG Media or any of its subsidiaries;

	•	other than travel loans or advances in the ordinary course of business consistent with past practice, make any loans, advances or capital contributions to, or investments in, any other person (other than its subsidiaries);


	•	not cancel any debts or waive any claims or rights of substantial value;

	•	other than in the ordinary course of business consistent with past practice, amend, modify or terminate, or waive, release or assign any rights under, any material contract;

	•	acquire, or agree to acquire, from any person any assets, operations, business or securities or engage in, or agree to engage in, any Merger, consolidation or other business combination with any person, except in connection with (i) capital expenditures permitted under the Merger Agreement or (ii) acquisitions of inventory and other tangible assets in the ordinary course of business consistent with past practice;

	•	not settle or compromise any litigation other than settlements or compromises of litigation where the settlement is limited solely to the release of claims and the monetary payment by JAG Media or any of its subsidiaries does not exceed $50,000 in the aggregate or $10,000 in any individual case;

	•	amend any stock option, warrant or other purchase right to acquire shares of JAG Media Common Stock or authorize cash payments in exchange for any of the foregoing;

	•	make any filings or registrations, with any governmental entity, except routine filings and registrations made in the ordinary course of business;

	•	take any actions outside the ordinary course of business;

	•	other than as required by GAAP (as advised by its regular independent accountants), make any changes in its accounting methods, principles or practices;

	•	make any tax election, change its method of tax accounting or settle any claim relating to Taxes;

	•	take any action or omit to do any act within its reasonable control which action or omission which is reasonably likely to result in any of the conditions to the Merger not being satisfied, except as may be required by applicable law; or

	•	agree, whether in writing or otherwise, to do any of the foregoing except that JAG Media may, with Cryptometrics’ prior consent and notification to Cryptometrics within two (2) business days thereafter spin-off various assets to its shareholders as a dividend.

Certain Covenants in Amendments to Merger Agreement

In the Amendment dated January 24, 2007, Cryptometrics approved JAG Media’s agreement with YA Global relating to certain borrowings and agreed to pay JAG Media $175,000 in addition to the $100,000 it had previously agreed to pay toward JAG Media’s transaction costs. In addition Messrs, Mazzarisi and Schoepfer agreed not to exercise any of their JAG Media options prior to Closing or the termination of the Merger Agreement. In subsequent amendments, Cryptometrics has agreed to advance an additional $617,660 of JAG Media’s transaction costs, subject to certain reimbursement obligations of JAG Media.

DISCLOSURE SCHEDULES

JAG Media and Cryptometrics agreed to finalize their respective Disclosure Schedules by January 11, 2006 and provide same to the other, which was to have had five days to accept or reject such Disclosure Schedule. Unless either JAG Media or Cryptometrics notified the other within such five day period that it rejected the other’s Disclosure Schedule, both JAG Media’s Disclosure Schedule and Cryptometrics’ Disclosure Schedule were to have been deemed accepted and have become part of the Merger Agreement. If either JAG Media or Cryptometrics notified the other within such five day period that it rejected the other’s Disclosure Schedule, JAG Media and Cryptometrics were to have negotiated in good faith to attempt to agree on an acceptable Disclosure Schedule for the succeeding ten days. If no agreement is reached by the end of such ten day good faith negotiation period, the Merger Agreement was to have terminated.

The Amendment dated January 24, 2007 set a new time limit for any party to request a Disclosure Schedule from the others. That time limit has expired so that at present no Disclosure Schedules will be delivered by the parties. Accordingly, the exceptions to the representations and warranties, covenants and other provisions in the

Merger Agreement which would have been disclosed by such Disclosures Schedules will not be disclosed. As JAG Media is a public company, Cryptometrics has access to all of JAG Media’s filings with the SEC and the disclosure made therein and the managements of both companies have discussed with the other their respective businesses, including discussions with YA Global (see “The Merger — Background of the Merger”).

EXCLUSIVITY

Except as otherwise provided in the Merger Agreement and except as set forth on JAG Media’s disclosure schedule (the “JAG Media Disclosure Schedule”) to the Merger Agreement or Cryptometrics’ Disclosure Schedule to the Merger Agreement (the “Cryptometrics Disclosure Schedule”) (see “Disclosure Schedule” above), each of Cryptometrics and JAG Media have agreed that it will not, and it will use its reasonable best efforts to cause its subsidiaries and its and their respective directors, officers, employees, affiliates and other agents and representatives (including any investment banking, legal or accounting firm retained by it or any of them and any individual member or employee of the foregoing) not to:


	•	initiate, solicit, encourage or seek, directly or indirectly, any inquiries relating to or the making or implementation of any proposal initiated by a third party (including any proposal or offer to the stockholders of Cryptometrics or JAG Media, as the case may be) with respect to Cryptometrics or JAG Media, which involves any of the following transactions, such transactions constituting a “Third Party Proposal”:

(i) any sale, lease or other disposition, direct or indirect (and however structured), of any business or assets of such party and/or any of its subsidiaries (which business or assets represent 10% or more of the consolidated revenues, net income or assets of such party and its subsidiaries, taken as a whole),

(ii) any tender offer (including a self-tender offer) or exchange offer that, if consummated, would result in a third party beneficially owning 10% or more of any class of securities of such party,

(iii) a merger, consolidation, share exchange, business combination, reorganization, joint venture, recapitalization, liquidation, dissolution or other similar transaction involving such party and/or any of its subsidiaries (which subsidiaries represent 10% or more of the consolidated revenues, net income or assets of such party and its subsidiaries, taken as a whole),

(iv) the issuance, sale or other disposition, direct or indirect (and however structured), of securities (or securities or other rights convertible into, or exercisable or exchangeable for, such securities) representing 10% or more of the voting power or capital stock of such party and/or any of its subsidiaries (which subsidiaries represent 10% or more of the consolidated revenues, net income or assets of such party and its subsidiaries, taken as a whole), or

(v) any combination of the foregoing (other than the Merger).


	•	engage in any negotiations concerning, or provide any information or data to, or have any substantive discussions with, any person relating to a Third Party Proposal;

	•	otherwise cooperate in or facilitate any effort or attempt to make, implement or accept a Third Party Proposal;

	•	enter into contract with any person relating to a Third Party Proposal; or

	•	release any third party from, or waive any provision of, any confidentiality or standstill agreement to which it is a party.

Each of Cryptometrics and JAG Media have agreed to immediately cease, and cause their respective subsidiaries and agents immediately to cease, any and all existing activities, discussions or negotiations with any third parties conducted heretofore with respect to any Third Party Proposal.

The Boards of Directors of JAG Media and Cryptometrics, may furnish information to, and enter into discussions or negotiations with, a person who has made an unsolicited, written, bona fide Third Party Proposal if, and only if, the Board of Directors of JAG Media and/or Cryptometrics have reasonably concluded that such Third Party Proposal constitutes a “Superior Proposal.” A “Superior Proposal” is an unsolicited written bona fide Third

Party Proposal pursuant to which a person (or its stockholders) would own, if consummated, all or substantially all of the outstanding capital stock of JAG Media or Cryptometrics (or of the surviving entity in a Merger or the direct or indirect parent of the surviving entity in a Merger) or all or substantially all the assets of JAG Media or Cryptometrics and their subsidiaries taken as a whole on terms that the Board of Directors of JAG Media and/or Cryptometrics determine, in its good faith judgment, to be more favorable to the stockholders of JAG Media or Cryptometrics from a financial point of view than the terms of the Merger and with any financing required to consummate the transaction contemplated by such Third Party Proposal committed or likely, in the good faith judgment of the Board of Directors of JAG Media or Cryptometrics, to be obtained by such third party on a timely basis.

The Board of Directors of JAG Media or Cryptometrics must also have (i) reasonably concluded, after receiving advice from its outside legal counsel, that, in light of such superior proposal, the furnishing of such information or entering into discussions is required to comply with its fiduciary obligations to its stockholders under applicable law, (ii) provided written notice to the other party of its intent to furnish information or enter into discussions or negotiations with such person at least 3 business days prior to taking any such action and (iii) obtained from such person an executed confidentiality agreement on terms no less favorable to JAG Media or Cryptometrics, as the case may be, than those contained in the Mutual Non Disclosure Agreement dated as of September 27, 2004 by and between JAG Media and Cryptometrics.

The Board of Directors of JAG Media or Cryptometrics must furnish to the other all information provided to the person who has made the superior proposal to the extent that such information has not been previously provided to Cryptometrics or JAG Media, as the case may be, and will keep the other promptly and reasonably informed as to the status of any discussions regarding such superior proposal.

No information may be furnished and no discussions may be entered into in the event that JAG Media or Cryptometrics have taken any actions inconsistent with the provisions of the Merger Agreement discussing the conduct of JAG Media and Cryptometrics with respect to Third Party Proposals and Superior Proposals.

The Merger Agreement does not prevent the Board of Directors of JAG Media or Cryptometrics from withholding, withdrawing, amending, modifying or changing its recommendation in favor of the approval of the stockholders of JAG Media or Cryptometrics, as the case may be, and, in the case of a tender or exchange offer made directly to the stockholders of JAG Media or Cryptometrics, a recommendation that the stockholders of JAG Media or Cryptometrics, as the case may be, accept the tender or exchange offer (each, a “Change of Recommendation”), if all of the following conditions are satisfied:


	•	a Superior Proposal is made to JAG Media or Cryptometrics and is not withdrawn;

	•	the Annual Meeting of the Stockholders of JAG Media has not occurred and the written consent of the stockholders of Cryptometrics has not been obtained;

	•	JAG Media or Cryptometrics, as the case may be, shall have provided at least 3 business days prior written notice (the “Notice Period”) to the other stating (A) that it has received a Superior Proposal, (B) the terms and conditions of such Superior Proposal and the identity the person making such Superior Proposal and (C) that it intends to effect a Change of Recommendation and the manner in which it intends to so;

	•	Cryptometrics shall not have, within the Notice Period, made an offer that the Board of Directors of JAG Media by a majority vote determines in its good faith judgment to be at least as favorable to such party and its stockholders as such Superior Proposal (it being agreed that the Board of Directors of such party shall convene a meeting to consider any such offer by the other party promptly following the receipt thereof);

	•	JAG Media shall not have, within the Notice Period, made an offer that the Board of Directors of Cryptometrics by a majority vote determines in its good faith judgment to be at least as favorable to such party and its stockholders as such Superior Proposal (it being agreed that the Board of Directors of such party shall convene a meeting to consider any such offer by the other party promptly following the receipt thereof);

	•	the Board of Directors of JAG Media or Cryptometrics, as the case may be, concludes in good faith, after receiving the advice of its outside legal counsel, that, in light of such Superior Proposal, the failure of it to

effect a Change of Recommendation would result in a breach of its fiduciary obligations to its stockholders under applicable law; and


	•	Neither JAG Media nor Cryptometrics shall have breached any of the provisions set forth with respect to the consideration and acceptance of a Superior Proposal set forth in the Merger Agreement.

PROXY STATEMENT; REGISTRATION STATEMENT

As promptly as practicable after the execution of the Merger Agreement, JAG Media, with the assistance of Cryptometrics, agreed to, and did, prepare and file with the SEC the Proxy Statement/Prospectus relating to the solicitation of proxies from JAG Media stockholders to authorize (i) the increase in the number of shares of JAG Media Common Stock authorized from 250,000,000 to 500,000,000 so as to permit the issuance of JAG Media Common Stock pursuant to the Merger and (ii) the change of JAG Media’s name to “Cryptometrics, Inc.” JAG Media prepared and filed with the SEC a Form S-4 Registration Statement in which the Proxy Statement was included as a prospectus (a) in connection with the registration under the Securities Act of (i) the shares of JAG Media Common Stock to be issued to Cryptometrics stockholders pursuant to the Merger, and (ii) the JAG Media Common Stock issuable upon exercise of the options, warrants and exchangeable securities to purchase Cryptometrics Common Stock which become options, warrants and exchangeable securities to purchase JAG Media Common Stock by virtue of the Merger, and (b) in connection with the registration for resale, subject to the provisions of Company Lock-Up and Voting Agreements, of the shares of JAG Media Common Stock issued to Robert Barra and Michael Vitale and Joel Shaw in the Merger. Each of Cryptometrics and JAG Media was required to use its reasonable best efforts to cause the Form S-4 Registration Statement to become effective as promptly as practicable and, prior to the effective date of the Form S-4 Registration Statement, JAG Media was required to use its reasonable best efforts to take all or any action required under any applicable federal or state securities laws in connection with the issuance of shares of JAG Media Common Stock pursuant to the Merger. Cryptometrics failed to pay the legal costs described in the non-binding letter of intent dated September 9, 2005, entered into by Cryptometrics and JAG Media, but JAG Media elected to do so and continued to take all such actions as it deemed advisable to enable the Form S-4 Registration Statement to become effective. Each of Cryptometrics and JAG Media furnished all information concerning itself in connection with such actions and the preparation of the Form S-4 Registration Statement and Proxy Statement.

Each of Cryptometrics and JAG Media have agreed to give the other party and its counsel a reasonable opportunity to review and comment on any amendment or supplement to the Form S-4 Registration Statement prior to filing any amendment or supplement with the SEC, and reasonable and good faith consideration shall be given to any comments made by the other party and its counsel.

Each of Cryptometrics and JAG Media will (i) promptly provide the other party and its counsel with any comments or other communications, whether written or oral, that it or its counsel may receive from time to time from the SEC or its staff with respect to the Form S-4 Registration Statement promptly after receipt of those comments or other communications and (ii) provide the other party with a reasonable opportunity to participate in the response to those comments and to provide comments on that response (to which reasonable and good faith consideration shall be given), including by participating in any discussions or meetings with the SEC.

Neither Cryptometrics nor JAG Media will make any amendment or supplement to the Form S-4 Registration Statement without the approval of the other party (such approval not to be unreasonably withheld or delayed). Each of Cryptometrics and JAG Media will advise the other, promptly after it receives notice thereof, of the time at which the Form S-4 Registration Statement has become effective or any supplement or amendment has been filed, of the issuance of any stop order, of the suspension of the qualification of the shares of JAG Media Common Stock issuable pursuant to the Merger for offering or sale in any jurisdiction.

The information supplied by Cryptometrics and JAG Media, as applicable, for inclusion in the Form S-4 Registration Statement and the Proxy Statement shall not, (i) at the time the Form S-4 Registration Statement is declared effective, (ii) at the time the Proxy Statement (or any amendment thereof or supplement thereto) is first mailed to the Cryptometrics Common Stockholders and JAG Media Common Stockholders or (iii) at the time of the Annual Meeting of the Stockholders of JAG Media, contain any untrue statement of a material fact or fail to state

any 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 were made, not misleading.

If, at any time prior to the Effective Time, any event or circumstance relating to Cryptometrics and subsidiaries, in the case of Cryptometrics, or to JAG Media and its subsidiaries, in the case of JAG Media, or their respective officers or directors, should be discovered by Cryptometrics or JAG Media that should be set forth in an amendment or a supplement to the Form S-4 Registration Statement or Proxy Statement so that any of such documents will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, Cryptometrics or JAG Media, as applicable, shall promptly inform the other party. All documents that JAG Media is responsible for filing with the SEC in connection with the Merger or the other transactions contemplated by Merger Agreement will comply as to form and substance in all material respects with the applicable requirements of the Securities Act and the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Each of Cryptometrics and JAG Media have agreed to use their reasonable best efforts to cause to be delivered to the other party two letters from their respective independent accountants, one dated approximately as of the date the Form S-4 Registration Statement is declared effective and one dated approximately as of the closing date, each addressed to the other party, in form and substance reasonably satisfactory to the other party and customary in scope and substance for comfort letters delivered by independent public accountants in connection with registration statements on Form S-4 under the Securities Act.

Each of Cryptometrics and JAG Media shall use its reasonable best efforts to cause to be delivered to the other party consents from their respective independent accountants, dated the date on which the Form S-4 Registration Statement is declared effective or a date not more than 2 days prior to such date, in form reasonably satisfactory to the other party and customary in scope and substance for consents delivered by independent public accountants in connection with registration statements on Form S-4 under the Securities Act.

MAINTENANCE OF REGISTRATION STATEMENTS

The parties acknowledged that JAG Media has an existing Registration Statement on Form S-8 which Cryptometrics agrees to cause to be maintained in effect following the Effective Time until all outstanding options covered thereby have been exercised or expired. Thomas J. Mazzarisi and Stephen J. Schoepfer have agreed not to exercise any of their existing stock options covered by such registration statement until the Closing or termination of the Merger Agreement.

ANNUAL MEETING OF STOCKHOLDERS OF JAG MEDIA

As required by the Merger Agreement, JAG Media held its 2006 Annual Meeting of Stockholders which approved (i) the amendment to JAG Media’s Articles of Incorporation to increase its authorized Common Stock and (ii) the amendment to JAG Media’s Articles of Incorporation to change the corporate name to “Cryptometrics, Inc.” upon consummation of the Merger. See Appendix B hereto for the text of such amendments as adopted.

CONSENT OF PRINCIPAL CRYPTOMETRICS STOCKHOLDERS

The principal stockholders of Cryptometrics, Messrs. Barra and Vitale, who each own 28.07% of the outstanding shares of Cryptometrics entitled to vote, have delivered to JAG Media a Company Voting and Lock-up Agreement pursuant to which each such principal stockholder irrevocably agrees to deliver to Cryptometrics a written consent in favor of adoption of the Merger Agreement and the Merger executed by each of the principal stockholders.

CONDITIONS TO THE MERGER

Conditions to the Obligations of JAG Media, Merger Sub and Cryptometrics to Effect the Merger

The obligations of JAG Media, Merger Sub and Cryptometrics to consummate the Merger are subject to the satisfaction on or prior to the closing date of the following conditions:


	•	The approval of the JAG Media Common Stockholders shall have been obtained to the foregoing amendments of the Articles of Incorporation, which condition has been met.

	•	Other than the filings of the Proxy Statement and Form S-4 of JAG Media and such items as may be required pursuant to the Cryptometrics Disclosure Schedule, all authorizations and orders of, declarations and filings with, and notices to any governmental entity required to permit the consummation of the Merger shall have been obtained or made and shall be in full force and effect.

	•	No temporary restraining order, preliminary or permanent injunction or other order preventing the consummation of the Merger shall be in effect.

	•	No law shall have been enacted or shall be deemed applicable to the Merger which makes the consummation of the Merger illegal.


	•	A Form S-4 Registration Statement shall have become effective under the Securities Act prior to the mailing of the Proxy Statement and Consent Solicitation/Prospectus by each of JAG Media and Cryptometrics to their respective stockholders, and shall not be the subject of any stop order or proceedings seeking a stop order.


	•	The shares of JAG Media Common Stock shall have been authorized for trading on the OTC Pink Sheets whether or not such authorization shall have been cancelled, which condition has been met.

	•	No action shall be pending or threatened before any court or other governmental entity or before any other person wherein an unfavorable order would (i) prevent consummation of the Merger, (ii) affect adversely the right of JAG Media to control Cryptometrics and the subsidiaries of Cryptometrics or (iii) restrain or prohibit JAG Media’s ownership or operation (or that of its subsidiaries or affiliates) of all or any material portion of the business or assets of Cryptometrics and its subsidiaries, taken as a whole, or compel JAG Media or any of subsidiaries or affiliates to dispose of or hold separate all or any material portion of the business or assets of Cryptometrics and its subsidiaries, taken as a whole, or of JAG Media and its subsidiaries, taken as a whole, and no such order shall be in effect.

Conditions to Obligations of JAG Media and Merger Sub to Effect the Merger

The obligations of JAG Media and Merger Sub to effect the Merger are subject to the satisfaction (or waiver by JAG Media in its sole discretion) of the following further conditions:


	•	Each of the representations and warranties of Cryptometrics set forth in the Merger Agreement, shall be true and correct at and as of the closing date as if made at and as of the closing date, except to the extent that such representations and warranties refer specifically to an earlier date, in which case such representations and warranties shall have been true and correct as of such earlier date.

	•	Each of the representations and warranties of the Principal Stockholders set forth in the Merger Agreement, shall be true and correct at and as of the closing date as if made at and as of the closing date, except to the extent that such representations and warranties refer specifically to an earlier date, in which case such representations and warranties shall have been true and correct as of such earlier date.

	•	Cryptometrics shall have performed, or complied with, in all material respects all obligations required to be performed or complied with by it under the Merger Agreement at or prior to the closing date. JAG Media shall have received a certificate signed on behalf of the Cryptometrics by the Co-Chief Executive Officer of Cryptometrics to such effect.

	•	There shall not have occurred any event, occurrence or change that has had, or could reasonably be expected to have, individually or in the aggregate, a material adverse effect on the Cryptometrics.

Conditions to Obligation of Cryptometrics to Effect the Merger

The obligation of Cryptometrics to effect the Merger is subject to the satisfaction (or waiver by Cryptometrics in its sole discretion) of the following further conditions:


	•	Each of the representations and warranties of JAG Media set forth in the Merger Agreement, shall be true and correct, subject to any materiality provision, at and as of the closing date as if made at and as of the closing date, except to the extent that such representations and warranties refer specifically to an earlier date, in which case such representations and warranties shall have been true and correct as of such earlier date.

	•	JAG Media and Merger Sub shall have performed or complied with in all material respects all obligations required to be performed or complied with by them under the Merger Agreement at or prior to the closing date. Cryptometrics shall have received a certificate signed on behalf of JAG Media by the Chief Executive Officer of JAG Media to such effect.

	•	There shall not have occurred any event, occurrence or change that has had, or would reasonably be expected to have, individually or in the aggregate, a material adverse effect on JAG Media and its subsidiaries taken as a whole.

	•	Cryptometrics shall have received releases from the current executive officers of JAG Media under any and all agreements they may have with JAG Media or any of its Subsidiaries, except that JAG Media shall remain contractually obligated to carry out its obligations to fulfill any exercise of options under existing employment agreements with the current executive officers of JAG Media and shall continue to provide such officers such medical coverage as it provides to its own employees and those of JAG Media (to be renamed Cryptometrics, Inc.) and except for any and all rights of indemnification.

	•	The holders of no more than 100,000 shares of Cryptometrics Common Stock shall have given notice of exercise of their appraisal rights and be in a position to perfect such rights under Delaware Law as determined just prior to the Effective Time.

BOARD OF DIRECTORS’ AND EXECUTIVE OFFICERS’ LIABILITY

JAG Media, Merger Sub and Cryptometrics have agreed, that upon the Effective Time, the directors and officers of Cryptometrics immediately prior to the Effective Time shall be the directors and officers of Cryptometrics, each to hold office until their respective death, permanent disability, resignation or removal or until their respective successors are duly elected and qualified, all in accordance with the Certificate of Incorporation and Bylaws of Cryptometrics in effect immediately prior effective filing date of the Certificate of Merger and Delaware law.

Cryptometrics has agreed that, from the Effective Time, it shall indemnify, defend and hold harmless, and provide advancement of expenses to, each person who becomes prior to the Effective Time, an officer, director or employee of Cryptometrics or any of its subsidiaries, against all losses, claims, damages, costs, expenses, liabilities or judgments or amounts that are paid in settlement of or in connection with any claim that is based in whole or in part on the fact that such person is or was a director, officer or employee of Cryptometrics or any of its subsidiaries and pertaining to any matter existing or occurring, or any acts or omissions occurring, at or prior to the Effective Time, whether asserted or claimed prior to, or at or after, the Effective Time.

TERMINATION OF THE MERGER AGREEMENT

The Merger Agreement shall terminate automatically on March 31, 2008 unless the parties agree otherwise in writing.

Termination by JAG Media (with any termination by JAG Media also being an effective termination by Merger Sub) or Cryptometrics

The Merger Agreement may be terminated and the Merger abandoned at any time prior to the Effective Time (i) by either JAG Media (provided that if JAG Media does so it shall issue Cryptometrics 1,000,000 shares of JAG Media Common Stock) or Cryptometrics without giving any reason therefor unless the parties agree otherwise or

(ii) by JAG Media or Cryptometrics if: (A) the Merger is not consummated on or before March 31, 2008; provided, however, that the right to terminate the Merger Agreement shall not be available to any party whose breach of a representation, warranty, covenant or agreement under the Merger Agreement has been the cause of or resulted in the failure of the Closing to occur on or before such date; or (B) a governmental entity shall have issued an order or taken any other action in any case having the effect of permanently restraining, enjoining or otherwise prohibiting the Merger, which order or other action is final or non-appealable.

Termination by JAG Media (with any termination by JAG Media also being an effective termination by Merger Sub)

The Merger Agreement may be terminated and the Merger abandoned at any time prior to the Effective Time by JAG Media if (i) any condition to the obligations of JAG Media under the Merger Agreement becomes incapable of fulfillment other than as a result of a breach by JAG Media of any covenant or agreement contained in the Merger Agreement, and such condition is not waived by JAG Media or (ii) there has been a breach by Cryptometrics of any representation, warranty, covenant or agreement contained in the Merger Agreement or if any representation or warranty of Cryptometrics shall have become untrue, (a) in either case such that the conditions to the Merger required by JAG Media under the terms of the Merger Agreement would not be satisfied and (b) any such breach is not curable, or, if curable, is not cured within 15 days after written notice of such breach is given to Cryptometrics by JAG Media.

The Merger Agreement may be terminated and the Merger abandoned at any time prior to the Effective Time by JAG Media if, at any time prior to the approval of the JAG Media Common Stockholders, (1) a superior proposal is made to JAG Media and is not withdrawn, (2) JAG Media shall have provided at least 3 business days prior written notice to Cryptometrics stating (a) that it has received a Superior Proposal, (b) the terms and conditions of such Superior Proposal and the identity the Person making such Superior Proposal and (c) that it intends to terminate the Merger Agreement, (3) the Cryptometrics shall not have, within such 3 business day period, made an offer that the Board of Directors of JAG Media by a majority vote determines in its good faith judgment (based on the written advice of its financial advisor) to be at least as favorable to JAG Media and the JAG Media Common Stockholders as such Superior Proposal (it being agreed that the Board of Directors of JAG Media shall convene a meeting to consider any such offer by Cryptometrics promptly following the receipt thereof and that JAG Media shall not enter into any such binding agreement during such 3 business day period) and (4) the Board of Directors of JAG Media concludes in good faith, after consultation with its outside legal counsel, that, in light of such Superior Proposal, the failure of the Board of Directors to accept such Superior Proposal would result in a breach of its fiduciary obligations to the JAG Media Common Stockholders under applicable law; provided, however that JAG Media shall not have breached any of the provisions set forth with respect to the consideration and acceptance of a Superior Proposal set forth in the Merger Agreement.

Termination by Cryptometrics

The Merger Agreement may be terminated and the Merger abandoned at any time prior to the Effective Time by Cryptometrics if (i) any condition to the obligations of Cryptometrics under the Merger Agreement becomes incapable of fulfillment other than as a result of a breach by Cryptometrics of any covenant or agreement contained in the Merger Agreement, and such condition is not waived by Cryptometrics or (ii) there has been a breach by JAG Media of any representation, warranty, covenant or agreement contained in the Merger Agreement or if any representation or warranty of Cryptometrics shall have become untrue, (a) in either case such that the conditions to the Merger required by Cryptometrics under the terms of the Merger Agreement would not be satisfied and (b) any such breach is not curable, or, if curable, is not cured within 15 days after written notice of such breach is given to JAG Media by Cryptometrics, or (iii) if JAG Media Common Stock is not approved for listing on the NASDAQ Capital Market.

The Merger Agreement may be terminated and the Merger abandoned at any time prior to the Effective Time by Cryptometrics if, at any time prior to the approval of the controlling Cryptometrics Common Stockholders, (1) a superior proposal is made to Cryptometrics and is not withdrawn, (2) Cryptometrics shall have provided at least 3 business days prior written notice to JAG Media stating (a) that it has received a superior proposal, (b) the terms and conditions of such superior proposal and the identity the person making such superior proposal and (c) that it intends

to terminate the Merger Agreement, (3) JAG Media shall not have, within such 3 business day period, made an offer that the Board of Directors of Cryptometrics by a majority vote determines in its good faith judgment (based on the written advice of its financial advisor) to be at least as favorable to Cryptometrics and the Cryptometrics Common Stockholders as such superior proposal (it being agreed that the Board of Directors of Cryptometrics shall convene a meeting to consider any such offer by JAG Media promptly following the receipt thereof and that Cryptometrics shall not enter into any such binding agreement during such 3 business day period) and (4) the Board of Directors of Cryptometrics concludes in good faith, after consultation with its outside legal counsel, that, in light of such superior proposal, the failure of the Board of Directors to accept such superior proposal would result in a breach of its fiduciary obligations to the Cryptometrics Common Stockholders under applicable law; provided, however that Cryptometrics shall not have breached any of the provisions set forth with respect to the consideration and acceptance of a superior proposal set forth in the Merger Agreement.

AMENDMENT AND WAIVER OF MERGER AGREEMENT

Any provision of the Merger Agreement may be amended or waived if such amendment or waiver is in writing and signed, in the case of an amendment, by each party to the Merger Agreement, or in the case of a waiver, by the party against whom the waiver is to be effective. After approval in connection with the matters presented in connection with the Merger by the Cryptometrics Common Stockholders, however, no amendment or waiver shall be made which requires by law further approval of the Cryptometrics Common Stockholders without such further approval.

No failure or delay by any party in exercising any right or privilege under the Merger Agreement shall operate as a waiver of such right or privilege, nor shall any single or partial exercise of any right or privilege under the Merger Agreement preclude any further exercise of such right or privilege or any other right, power or privilege.

To the maximum extent permitted by law, no waiver that may be given by a party shall be applicable except to the specific instance for which it was given and no notice to or demand on the party shall be deemed to be a waiver of any obligation of such party or the right of the party giving such notice or demand to take further action without notice or demand.

UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION

The following unaudited condensed pro forma financial statements of JAG Media and Cryptometrics were derived from the historical consolidated financial statements of JAG Media and Cryptometrics and should be read in conjunction with the historical financial statements and the notes thereto, included elsewhere in this Consent Solicitation/Prospectus. The unaudited pro forma condensed balance sheet combines the historical unaudited consolidated balance sheets of JAG Media and Cryptometrics as of October 31, 2007 as if the reverse acquisition had been consummated as of that date and accounted for as a reverse acquisition in which Cryptometrics is the accounting acquirer and JAG Media is the accounting acquiree. The unaudited condensed pro forma statements of operations combine the operations of JAG Media for the three months ended October 31, 2007 with the operations of Cryptometrics for the three months ended July 31, 2007 as if the reverse acquisition were completed at the beginning of the three month period. The unaudited condensed pro forma statements of operations combine the operations of JAG Media for the year ended July 31, 2007 with the operations of Cryptometrics for the year ended April 30, 2007 as if the reverse acquisition were completed at the beginning of the year. Certain reclassifications have been made to the historical presentation of the financial statements of Cryptometrics to conform to the presentation used in the unaudited pro forma condensed financial statements.

The unaudited condensed pro forma financial statements were prepared using the purchase method of accounting in accordance with Statement of Financial Accounting Standards No. 141 “Business Combinations”. On December 27, 2005 (as subsequently amended) JAG Media entered into a Merger Agreement with Cryptometrics pursuant to which Cryptometrics would merge with a newly created subsidiary (the “Merger Sub”) of JAG Media. In consideration of the Merger, the stockholders of Cryptometrics would acquire shares of JAG Media Common Stock which would, upon issuance, represent approximately 87% of the combined company’s outstanding common stock, in exchange for all of the issued and outstanding shares of common stock of Cryptometrics. Since the stockholders of Cryptometrics will receive the majority of the voting shares of the combined company, and the board of directors and management of the combined company will be controlled by members of the board of directors and management of Cryptometrics, the Merger will be accounted for as a reverse acquisition whereby Cryptometrics will be the accounting acquirer and JAG Media, the legal acquirer, will be the accounting acquiree. In such case, JAG Media’s existing public stockholders would experience significant dilution from the issuance of these shares to the stockholders of Cryptometrics.

Until JAG Media and Cryptometrics agree otherwise, the Merger Agreement, notwithstanding the approval by the Cryptometrics stockholders, may be canceled with or without any reason by either JAG Media or Cryptometrics with no liability. Additionally, the consummation of the Merger is subject to various conditions set forth in the Merger Agreement. The Merger Agreement shall terminate automatically on March 1, 2008 unless the parties agree otherwise in writing.

The Merger Agreement is attached as Appendices C-1 through C-12 hereto and should be referred to for further information regarding the Merger.

Holders of Cryptometrics Common Stock will in general receive shares of JAG Media Common Stock in proportion to their holdings of Cryptometrics Common Stock compared to all outstanding shares of Cryptometrics Common Stock (including as outstanding the Cryptometrics Exchange Shares) at the time of the Merger, subject to certain adjustments. A limited number of Cryptometrics stockholders holding 779,750 shares of Cryptometrics Common Stock, by virtue of subscription agreements with Cryptometrics, will receive a greater or lesser number of JAG Media shares. They will be entitled to own shares of the merger candidate’s common stock (now JAG Media Common Stock) with an aggregate fixed value following the effectiveness of the Merger (based on the post-Merger opening price on the OTC Bulletin Board or Pink Sheets) of $15,516,250, equal to 200% (in the case of 769,250 shares of Cryptometrics Common Stock) or 125% (in the case of 10,500 shares of Cryptometrics

Common Stock) of the original aggregate purchase price of their shares of Cryptometrics Common Stock under their subscription agreements, which in each case was $10.00 per share. The remaining number of shares of JAG Media Common Stock available to other stockholders of Cryptometrics will then be shared by such other stockholders pro rata to the number of shares held by each compared to the aggregate number shares of Cryptometrics Common Stock (including the Cryptometrics Exchange Shares) held by all of such other stockholders (including the holders of the Exchangeable Shares).

No fractional shares of JAG Media Common Stock shall be issued in connection with the Merger.

The calculation of the purchase price as reflected in these pro forma condensed financial statements has been based upon a preliminary estimate of the number of shares to be effectively issued to the JAG Media stockholders as of the date of the acquisition. Management of Cryptometrics is currently assessing the fair values of the assets of JAG Media to be acquired and the liabilities to be assumed. For the purposes of preparing the pro forma financial statements, management has made a preliminary estimate that the fair values of the identifiable tangible and intangible assets and the liabilities of JAG Media to be acquired or assumed by Cryptometrics will approximate their historical carrying values as of the effective date of the acquisition and the excess purchase price has been allocated to a single caption called “Intangible assets — in-process research and development acquired”. This preliminary allocation of the purchase price is dependent upon certain estimates and assumptions which are preliminary and have been made solely for the purpose of developing such pro forma condensed financial statements.

A final determination, as described below, of the fair values of JAG Media’s identifiable tangible and intangible assets and its liabilities will be based on their fair values as of the date of completion of the acquisition and such valuations could change significantly upon the completion of further analyses from those used in the condensed pro forma financial statements presented below.

The unaudited condensed pro forma financial statements were prepared using the assumptions described below and in the related notes. The historical consolidated financial information has been adjusted to give effect to pro forma events that are:


	•	directly attributable to the acquisition;


	•	factually supportable; and


	•	with respect to the statements of operations, expected to have a continuing impact on the results.

A valuation of the assets acquired and liabilities assumed for the purpose of allocating the purchase price has not yet been undertaken by the management of Cryptometrics in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141 “Business Combinations” at this time. Upon closing, the management of Cryptometrics will engage third party experts and such other qualified personnel as will be required to make a full valuation to properly allocate the purchase price to the estimated fair value of the identifiable assets acquired and liabilities assumed. The fair value of the common stock to be effectively issued to JAG Media stockholders as the consideration for the acquisition of $12,648,751 plus the excess of the fair value of the net liabilities assumed over the fair value of the identifiable assets acquired of $10,634,765 (a total of $23,283,516) has been preliminarily allocated to an intangible asset consisting of in process research and development acquired. In accordance with SFAS 141 such amount has been immediately written off and accounted for as explained in (a) and (i) in Note 2 to the pro forma financial statements. Management of Cryptometrics does not believe at this time that there is any basis for adjusting the historical values of the assets and liabilities of JAG Media or that there are any additional identifiable assets or liabilities that should be recorded. However, if after the more extensive evaluation has been performed upon the consummation of the acquisition there is appropriate evidence that any amount allocated to the historical balances or the amount allocated to in-process research and development acquired in the pro forma condensed financial statements should be adjusted or additional assets should be recorded in accordance with the provisions of SFAS 141 and subsequently amortized, the related adjustments will be recorded in subsequent post-

acquisition financial statements. The amounts recorded as a result of the preliminary allocation in the pro forma condensed financial statements may change significantly. Upon completion of the allocation, if any amounts are allocated to goodwill and/or intangible assets other than in-process research and development acquired, management will perform the tests required by SFAS No. 142, “Goodwill and Other Intangible Assets” and record additional impairment charges if necessary. In addition to the completion of the final valuation of certain assets acquired and liabilities assumed, the impact of ongoing integration activities, the timing of completion of the transaction and other changes in JAG Media’s net tangible and intangible assets that occur prior to completion of the transaction could cause material differences in the information presented.

The proposed transaction is subject to various conditions being satisfied prior to closing, including, among others:


	•	neither JAG Media nor Cryptometrics having terminated the Merger Agreement, which either may do, with or without any reason at any time with no liability except that JAG Media must issue 1,000,000 shares of its Common Stock to Cryptometrics if it unilaterally terminates the Merger Agreement;


	•	there is no law or court order prohibiting the Merger;


	•	the representations and warranties of JAG Media, Merger Sub and Cryptometrics remain accurate in all respects, with permitted exceptions;


	•	each of JAG Media, Merger Sub and Cryptometrics has performed, in all material respects, all of its respective obligations under the Merger Agreement;


	•	the holders of no more than 100,000 shares of Cryptometrics common stock exercise appraisal rights in connection with the Merger; and


	•	JAG Media not having outstanding indebtedness for borrowed money in excess of the principal amount of $4,350,000.

The unaudited condensed pro forma financial statements are provided for illustrative purposes only. They do not purport to represent what the combined company’s results of operations and financial position would have been had the transaction actually occurred as of the dates indicated, and they do not purport to project the combined company’s future results of operations or financial position.

UNAUDITED CONDENSED PRO FORMA BALANCE SHEET
AS OF OCTOBER 31, 2007


	JAG						Pro Forma
	MEDIA			Cryptometrics			Adjustments

ASSETS
Current assets:
Cash and cash equivalents	$	138,002		$	2,541,202					$	2,679,204
Short-term investments					2,621,377						2,621,377
Accounts receivable, net		53,600			185,250						238,850
Inventories					202,004						202,004
Income tax recoverable					509,840						509,840
Deferred finance fees					284,451						284,451
Other current assets		329,526			43,810						373,336

Total current assets		521,128			6,387,934						6,909,062
Equipment, net		47,621			835,959						883,580
Other assets:
Goodwill					10,700,000						10,700,000
Intangible assets — in-process research and development acquired							$	23,283,516	(a)
								(23,283,516	)(b)
Investment in related party					3,630,184						3,630,184
Patents					455,940						455,940
Total Other Assets		—			14,786,124						14,786,124

Total	$	568,749		$	22,010,017		$	—		$	22,578,766


LIABILITIES AND STOCKHOLDERS’ EQUITY DEFICIENCY
Current liabilities:
Credit line				$	1,443,883					$	1,443,883
Convertible debentures payable, net					9,075,050						9,075,050
Accounts payable and accrued expenses	$	975,973			1,183,464						2,159,437
Accrued compensation					10,279						10,279
Deferred revenues		25,817									25,817
Derivative liability		9,069,300			3,163,191			396,053	(c)		12,628,544

Total current liabilities		10,071,090			14,875,867						25,343,010
Long term liabilities:
Convertible debentures payable, net		1,132,420									1,132,420

Total liabilities		11,203,510			14,875,867			396,053			26,475,430

Mandatorily redeemable Class B common stock; par value $.00001 per share:
400,000 shares designated as Series 2; 381,749 shares issued and outstanding		4									4
40,000 shares designated as Series 3; 21,500 shares issued and outstanding		—									—

		4									4

Commitments and contingencies
Stockholders’ equity (deficiency):
Preferred stock; par value $.00001 per share; 50,000,000 shares authorized, none issued		—			—			—			—
Common stock; par value $.00001 per share; 500,000,000 shares authorized; 53,103,617 shares issued and outstanding; 447,803,633 shares to be outstanding		531			119,819		$	(115,872	)(d)		4,478
Additional paid-in capital		48,478,693			38,276,923			(36,110,654	)(b)(c)(d)		50,644,962
Accumulated deficit		(59,113,989	)		(31,646,959	)		35,830,473	(a)(b)(e)		(54,930,475	)
Accumulated other comprehensive income					384,367						384,367

Total stockholders’ equity (deficiency)		(10,634,765	)		7,134,150			(396,053	)		(3,896,668	)

Total	$	568,749		$	22,010,017		$	—		$	22,578,766

See Notes to Unaudited Condensed Pro Forma Financial Statements.

NOTES TO UNAUDITED CONDENSED
PRO FORMA FINANCIAL STATEMENTS


Note 1:	Estimated Purchase Price and Shares to be Issued

The following unaudited condensed pro forma financial statements of JAG Media and Cryptometrics were derived from the historical consolidated financial statements of JAG Media and Cryptometrics and should be read in conjunction with the financial statements and the Notes thereto, included elsewhere in this Consent Solicitation/Prospectus. The unaudited pro forma condensed balance sheet combines the historical unaudited consolidated balance sheets of JAG Media and Cryptometrics as of October 31, 2007 as if the reverse acquisition had been consummated as of that date. The unaudited condensed pro forma statements of operations for the three months ended October 31, 2007 combine the unaudited historical consolidated statements of operations of JAG Media for the three months ended October 31, 2007 and Cryptometrics for the three months ended July 31, 2007 as if the reverse acquisition were completed at the beginning of the period. The unaudited condensed pro forma statement of operations for the year ended July 31, 2007 combines the audited historical statement of operations of JAG Media for the year ended July 31, 2007 with the audited historical consolidated statement of operations of Cryptometrics for the year ended April 30, 2007 as if the reverse acquisition was completed at the beginning of the year. Certain reclassifications have been made to the historical presentation of Cryptometrics to conform to the presentation used in the unaudited pro forma condensed financial statements.

Purchase Price Calculation: (all numbers in thousands except for per share amount):


Number of shares of JAG Media Common Stock outstanding as of October 31, 2007 used as an estimate of the number of shares to be effectively purchased by Cryptometics as of the effective date of the acquisition		53,104

Fair value per share applied to the number of shares effectively purchased by Cryptometrics — 11 day weighted average JAG Media stock price from the “Pink Sheets” for the period from September 7, 2005 to September 21, 2005, comprising the period of five trading days before and after the date of announcement of the terms of the acquisition agreement	$	0.23819

Estimated purchase price	$	12,649

Preliminary allocation of estimated excess purchase price:
Estimated purchase price	$	12,649
Excess of estimated fair value of the liabilities assumed over the fair value of the identifiable assets acquired (JAG Media’s stockholders’ deficiency) as of October 31, 2007		10,635

Excess purchase price preliminary allocated to intangible assets — in process research and development acquired	$	23,284

A purchase price valuation has not yet been undertaken by the management of Cryptometrics in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141 “Business Combinations”. Upon closing, the management of Cryptometrics will engage third party experts and such qualified personnel as will be required to make a full valuation to properly allocate the fair value of the identifiable assets acquired and liabilities assumed. The fair value of the common stock to be effectively issued to JAG Media stockholders as the consideration for the acquisition of $12,649 plus the excess of the fair value of the net liabilities assumed over the fair value of the identifiable assets acquired of $10,635 (a total of $23,284) has been preliminarily allocated to in process research and development acquired under a single caption called “Intangible assets — in-process research and development acquired “. In accordance with SFAS No. 141 such amount has been immediately written off and accounted for as explained in (a) and (i) in Note 2 to the pro forma financial statements. Management of Cryptometrics does not believe at this time that there is any basis for adjusting the historical value of the assets and liabilities of JAG Mediaor that there are any additional identifiable assets or liabilities that should be recorded. However, if after the more extensive evaluation has been performed upon consummation of the acquisition, there is appropriate evidence that any amount allocated to the historical balances or the amount alloated to in process research and development

NOTES TO UNAUDITED CONDENSED
PRO FORMA FINANCIAL STATEMENTS — (Continued)

acquired in the pro forma condensed financial statements should be adjusted or additional assets should be recorded in accordance with the provisions of SFAS 141 and subsequently amortized, the related adjustments will be recorded in subsequent post-acquisition financial statements. The accompanying pro forma condensed financial statements do not reflect such potential effects of reallocations and/or impairment charges.


Note 2:	Pro Forma Financial Statement Adjustments

The preliminary adjustments to record the reverse acquisition of JAG Media by Cryptometrics are as follows:

(a) an adjustment to record the excess of purchase price over the carrying value of net liabilities acquired which has preliminarily been recorded as an intangible asset consisting of in-process research and development acquired of $23,283,516 on the balance sheet;

(b) an adjustment to write off the portion of intangible assets recorded as in-process research and development acquired of $23,283,516 from the balance sheet in accordance with SFAS 141;

(c) an adjustment to increase the derivative liablilty by $396,053 to reflect the increase in the fair market value of warrants to purchase 12,000,000 shares of common stock. The increase is attributable to the effects of the January 24, 2007 amendment to the terms of the convertible debentures and warrants, pursuant to which the exercise price of the warrants will change from the lower of prices ranging from $0.40 to $0.80 or 90% of the volume weighted average price of Jag Media’s common stock as quoted by Bloomberg, LP during the 30 trading days immediately preceding the Conversion Date to 95% of the volume weighted average price of the common stock as quoted by Bloomberg, LP during the 30 trading days immediately preceding the Conversion Date.

(d) an adjustment to effectively record the issuance of 394,700,016 shares of JAG Media’s common stock in conjunction with the reverse acquisition representing common stock reserved for issuance initially to the Cryptometrics stockholders;

(e) the elimination of JAG Media’s accumulated deficit of $59,113,989;

(f) an adjustment to general and administrative expenses of $243,750 for the three months ended October 31, 2007 to account for Cryptometrics’ options issuable to employees to purchase the equivalent 4,853,000 shares of JAG Media’s common stock, effective upon completion of the reverse acquisition of JAG Media by Cryptometrics stock, in accordance with JAG Media’s accounting for stock options under SFAS 123; and

(g) an adjustment to general and administrative expense of $164,167 for the three months ended October 31, 2007 to reflect the increase to the salaries of two Cryptometrics’ officers based on a compensation agreement that is effective upon the completion of the reverse acquisition of JAG Media by Cryptometrics from $196,667 annually, each, to $525,000 annually, each.

(h) an adjustment to decrease the gain on change in value of derivative liability by $503,113 for the three months ended October 31, 2007 to reflect the change in the exercise price of warrants issued based on the assumption that the warrant would have been valued on July 31, 2007 and October 31, 2007 pursuant to the change in the terms described in (c) above.

(i) the accompanying pro forma financial statements do not include adjustments resulting from non-recurring charges attributable to the “Change in Control” clauses in the employment agreements of Thomas J. Mazzarisi and Stephen J. Schoepfer with JAG Media pursuant to which such officers would receive options to purchase 750,000 shares of common stock each with an aggregate fair value as of October 31, 2007 of $614,804 using the Black-Scholes option pricing model assuming a risk free interest rate of 6% annually, no dividend payment, annual volatility of 209.285%, an exercise price, defined in the employment agreements as the average closing bid price for 30 days preceding change in control, of $0.7313, and the stock price of $0.82 and cash consideration of $300,000 as such charges do not reflect an on-going charge that should be considered as part of the continuing operations of the company. The accompanying pro forma statement of operations does not include an adjustment

NOTES TO UNAUDITED CONDENSED
PRO FORMA FINANCIAL STATEMENTS — (Continued)

from the non-recurring charge attributable to the write-off of in-process research and development acquired of $23,283,516.

(j) an adjustment to general and administrative expenses of $975,000 for the year ended July 31, 2007 to account for Cryptometrics’ options issuable to employees to purchase the equivalent 4,853,000 shares of JAG Media stock, effective upon completion of the reverse acquisition of JAG Media by Cryptometrics stock, in accordance with JAG Media’s accounting for stock options under SFAS 123; and

(k) an adjustment to general and administrative expense of $730,000 for the year ended July 31, 2007 to reflect the increase to the salaries of two Cryptometrics’ officers based on a compensation agreement that is effective upon the completion of the reverse acquisition of JAG Media by Cryptometrics from $196,667 annually, each, to $525,000 annually, each.

(l) an adjustment to reduce loss on change in value of derivative liability by $107,060 for the year ended July 31, 2007 to reflect the change in the exercise price of warrants issued based on the assumption that the warrant would have been valued on July 31, 2007 pursuant to the change in terms described in (c) above.

(m) the accompanying pro forma financial statements do not include adjustments resulting from non-recurring charges attributable to the “Change in Control” clauses in the employment agreements of Thomas J. Mazzarisi and Stephen J. Schoepfer with JAG Media pursuant to which such officers would receive options to purchase 750,000 shares of common stock each with an aggregate fair value as of July 31, 2007 of $727,300 using the Black-Scholes option pricing model assuming a risk free interest rate of 6% annually, no dividend payment, annual volatility of 216.5%, an exercise price, defined in the employment agreements as the average closing bid price for 30 days preceding change in control, of $1.055, and the stock price of $0.97 and cash consideration of $300,000 as such charges do not reflect an on-going charge that should be considered as part of the continuing operations of the company. The accompanying pro forma statement of operations does not include an adjustment from the non-recurring charge attributable to the write-off of in-process research and development acquired of $23,283,516.

In considering the recommendations of the respective Boards of Directors of JAG Media and Cryptometrics with respect to the Merger Agreement and the Merger, stockholders should be aware that the directors and executive officers of JAG Media and Cryptometrics have interests that are different from, or in addition to, the interests of stockholders generally. Each company’s Board of Directors was aware of these interests and considered them, among other matters, in approving the Merger Agreement and the transactions contemplated thereby.

BOARD OF DIRECTORS AND EXECUTIVE OFFICERS

JAG Media, Merger Sub and Cryptometrics have agreed, that upon the effective filing date of the Certificate of Merger of Merger Sub with and into Cryptometrics (the “Certificate of Merger”) with the Secretary of State of the State of Delaware, the directors and officers of Cryptometrics immediately prior to the Effective Time of the Certificate of Merger shall be the directors and officers of Cryptometrics, each to hold office until their respective death, permanent disability, resignation or removal or until their respective successors are duly elected and qualified, all in accordance with the Certificate of Incorporation and Bylaws of Cryptometrics in effect immediately prior effective filing date of the Certificate of Merger and Delaware law.

The directors of Cryptometrics shall also become the directors of JAG Media at the Effective Time.

OPTIONS EXERCISABLE BY OFFICERS OF JAG MEDIA UPON A CHANGE IN CONTROL

Pursuant to the employment agreements between JAG Media and each of Thomas J. Mazzarisi and Stephen J. Schoepfer, Messrs. Mazzarisi and Schoepfer are entitled to receive, immediately prior to a change in control (such as the Merger) an option to acquire 1,000,000 shares (reduced to 750,000 shares in connection with the Merger) of JAG Media common stock at an exercise price equal to the fair market value of the stock prior to such change in control. Such fair market value will be determined in accordance with Treasury Regulation Section 1.409A-1(b)(5)(iv)(A) on the basis of the average closing bid price of such JAG Media common stock over the 30 days preceding such change in control. The options will be exercisable immediately on a cashless basis, with one half of such shares being subject to a lock up period of one year from the date of the closing of the Merger.

INDEMNIFICATION AND INSURANCE

Cryptometrics has agreed that, from the effective filing date of the Certificate of Merger, it will indemnify, defend and hold harmless, and provide advancement of expenses to, each person who becomes prior to the effective filing date of the Certificate of Merger, an officer, director or employee of Cryptometrics or any of its subsidiaries, against all losses, claims, damages, costs, expenses, liabilities or judgments or amounts that are paid in settlement of or in connection with any claim that is based in whole or in part on the fact that such person is or was a director, officer or employee of Cryptometrics or any of its subsidiaries and pertaining to any matter existing or occurring, or any acts or omissions occurring, at or prior to the effective filing date of the Certificate of Merger, whether asserted or claimed prior to, or at or after, the effective filing date of the Certificate of Merger.

Cryptometrics’ indemnification of such directors, officers and employees shall be to the same extent such directors, officers and employees are entitled to be indemnified or have the right to advancement of expenses as of the date of the Merger Agreement by JAG Media or any of its subsidiaries.

JAG Media has also agreed that from and after the effective filing date of the Certificate of Merger, it shall purchase and maintain directors’ and officers’ liability insurance policies with coverage in such amounts and terms as are comparable to those insurance policies maintained by public companies that have independent directors and whose securities are listed on the NASDAQ Capital Market. Such directors’ and officers’ policies to be purchased and maintained by JAG Media shall also cover, for a period of 6 years from the effective filing date of the Certificate of Merger, the former officers and directors of JAG Media with respect to claims arising from facts or events that occurred prior to such time.

REGISTRATION RIGHTS

The Registration Statement on Form S-4 shall also register the JAG Media shares for which outstanding options and warrants of Cryptometrics, including options and warrants for outstanding Exchangeable Shares of Cryptometrics’ Canadian subsidiary, Cryptometrics Canada, Inc., which may be exercised after the Merger. Additionally, the Registration Statement on Form S-4 shall separately register the resale of the shares of JAG Media Common Stock issuable in connection with the Merger to the current Co-Chief Executive Officers of Cryptometrics, Robert Barra and Michael A. Vitale, and the current Chief Strategy Officer of Cryptometrics, Joel Shaw, so that such shares are immediately saleable by them subject to the twelve-month lock-up restriction noted above.

SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION

In accordance with the terms of the Merger Agreement, stockholders of Cryptometrics shall not be permitted to sell or otherwise dispose of sixty-five percent (65%) of the JAG Media Common Stock received in conjunction with the Merger for a period of twelve months from the closing date of the transaction. Although Cryptometrics does not have a separate binding agreement with its stockholders regarding the disposition of the JAG Media Common Stock that they are to receive in connection with the Merger, Cryptometrics views them as bound by the described restriction because it is part of the Merger Agreement which requires the approval of the stockholders of Cryptometrics. In any case, the JAG Media Common Stock received by the Cryptometrics stockholders in the Merger will be received subject to such restriction which will be enforced by a mechanism imposed by the transfer agent. Subject to compliance with all relevant securities laws, thirty-five percent (35%) of the shares of JAG Media Common Stock issued to the Cryptometrics stockholders in connection with the Merger shall not be subject to the twelve-month lock-up provision.

The Form S-4 which includes this prospectus separately registers the resale of the shares of JAG Media Common Stock issuable in connection with the Merger to the current Co-Chief Executive Officers of Cryptometrics, Robert Barra and Michael A. Vitale, and the current Chief Strategy Officer of Cryptometrics, Joel Shaw, so that such shares shall be saleable by them subject to the lock-up restrictions noted above.

The following table sets forth information with respect to the selling stockholders and the shares of JAG Media Common Stock estimated to be beneficially owned by each selling stockholder that may be offered under this prospectus.


						Number of
	Shares Beneficially					Shares of JAG Media					Shares Beneficially
	Owned Before Offering					Common Stock Being Offered					Owned After Offering
Name	Number		%			Number		%			Number		%

Robert Barra		96,687,500		21.8	%		96,687,500		21.8	%		0		0	%
Michael Vitale		96,687,500		21.8	%		96,687,500		21.8	%		0		0	%
Joel Shaw		26,198,835		5.9	%		26,198,835		5.9	%		0		0	%

JAG Media is registering the above-described shares covered by this prospectus on behalf of the above named selling stockholders. As used in this prospectus, “selling stockholders” includes donees, pledgees, transferees or other successors-in-interest selling shares received after the date of this prospectus from a selling stockholder as a gift, pledge, partnership distribution or other non-sale related transfer. These shares will be offered and sold by each selling stockholder for its own account. JAG Media will not receive any of the proceeds from the sale of such shares pursuant to this prospectus. JAG Media has agreed to bear the expenses of the registration of these shares, including legal and accounting fees. JAG Media estimates these incremental expenses to be de minimis. The selling stockholders will bear all brokerage commissions and any similar selling expenses attributable to the sale of shares covered by this prospectus.

The selling stockholders may offer and sell these shares from time to time in transactions in the over-the-counter market or in negotiated transactions, at market prices prevailing at the time of sale. Such transactions may or may not involve brokers or dealers. The selling stockholders have advised JAG Media that they have not entered into any agreements, understandings or arrangements with any underwriters or broker-dealers regarding the sale of their shares, nor is there an underwriter or coordinating broker acting in connection with the

proposed sale of shares by the selling stockholders. Sales may be made directly to purchasers or to or through broker-dealers which may act as agents or principals. Broker-dealers may receive compensation in the form of discounts, concessions or commissions from the selling stockholders or the purchasers of shares for whom such broker-dealers may act as agent or to whom they may sell as principal, or both (which compensation as to a particular broker-dealer may be in excess of customary commissions).

The selling stockholders may also use Rule 144 under the Securities Exchange Act to sell the shares in open market transactions if they meet the criteria and conform to the requirements of such rule.

Upon JAG Media being notified by any selling stockholder that any material arrangement has been entered into with a broker-dealer for the sale of shares covered by this prospectus through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker dealer, JAG Media will file a supplement to this prospectus, or a post-effective amendment, if required, disclosing (i) the name of the selling stockholder and of the participating broker-dealer(s), (ii) the number of shares involved, (iii) the price at which such shares were sold, (iv) the commissions paid or discounts or concessions allowed to such broker-dealer(s), where applicable, (v) that such broker-dealer(s) did not conduct any investigation to verify the information set out in this prospectus and (vi) other facts material to the transaction. In addition, upon being notified by any selling stockholder that a donee, pledgee, transferee or other successor-in-interest intends to sell more than 500 shares, JAG Media will file a supplement to this prospectus.

The selling stockholders have, prior to any sales, agreed not to effect any offers or sales of JAG Media Common Stock in any manner other than as specified in this prospectus and not to purchase or induce others to purchase JAG Media Common Stock in violation of any applicable state or federal securities laws, rules and regulations and the rules and regulations of the Pink Sheets or the OTC Bulletin Board or NASDAQ Capital Market. Except for the private placement documents described herein, there are no agreements or understandings, formal or informal, pertaining to the distribution of the shares described in this prospectus.

The selling stockholders will act independently of JAG Media in making decisions with respect to the timing, manner and size of each sale. The selling stockholders may sell the shares through the Pink Sheets or on the OTC Bulletin Board or on the NASDAQ Capital Market, as relevant, at prices and at terms then prevailing or at prices related to the then current market price or in private sales at negotiated prices directly or through brokers.

Any broker-dealer participating in transactions as agent may receive commissions from the selling stockholders, and, if acting as agent for the purchase of the shares, from the purchaser. Usual and customary brokerage fees will be paid by the selling stockholders. Broker-dealers may agree with the selling stockholders to sell a specified number of shares at a stipulated price per share, and, to the extent the broker-dealer is unable to do so acting as agent for the selling stockholders, to purchase as principal may then resell the shares from time to time in transactions in the over-the-counter market, in negotiated transactions or by a combination of these methods of sale, at market prices prevailing at the time of sale or at negotiated prices, and in connection with resales may pay to or receive from the purchasers of the shares commissions as described below.

In order to comply with the securities laws of some states, if applicable, the shares will be sold in some jurisdictions only through registered or licensed brokers or dealers. In some states, the shares may not be sold unless the shares have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.

STOCK REPURCHASE PROGRAMS

JAG Media does not have a stock repurchase program and has no intention of establishing such a program at this time. From time to time JAG Media’s affiliates may purchase JAG Media Common Stock in the secondary market for their own account. Any such purchases will be conducted in compliance with the anti-manipulation rules under the Securities Exchange Act.

REGULATION M

JAG Media has advised the selling stockholders that the anti-manipulation rules under the Securities Exchange Act may apply to sales of shares in the market and to the activities of the selling stockholders and any of their

respective affiliates. The selling stockholders have advised JAG Media that during the time as the selling stockholders may be engaged in the attempt to sell shares registered under this prospectus, they will:


	•	not engage in any stabilization activity in connection with any of the shares;

	•	not bid for or purchase any of the shares or any rights or acquire the shares, or attempt to induce any person to purchase any of the shares or rights to acquire the shares other than as permitted under the Securities Exchange Act;

	•	not effect any sale or distribution of the shares until after the prospectus shall have been appropriately amended or supplemented, if required, to describe the terms of the sale or distribution; and

	•	effect all sales of shares in broker’s transactions through broker-dealers acting as agents, in transactions directly with market makers, or in privately negotiated transactions where no broker or other third party, other than the purchaser, is involved.

The selling stockholders may indemnify any broker-dealer that participates in transactions involving the sale of the shares against some liabilities, including liabilities arising under the Securities Act. Any commissions paid or any discounts or concessions allowed to any broker-dealers, and any profits received on the resale of shares, may be deemed to be underwriting discounts and commissions under the Securities Act if the broker-dealers purchase shares as principal.

MANAGEMENT OF JAG MEDIA (TO BE RENAMED CRYPTOMETRICS, INC.)

At the Effective Time of the Merger, the directors and executive officers of JAG Media (to be renamed Cryptometrics, Inc.)., shall be as follows:

Robert Barra, 53, has over 28 years of experience in financing, managing and operating companies in healthcare, technology and other industries. Mr. Barra co-founded Cryptometrics in 2000 and has served as its Co-Chief Executive Officer’ since that time. Since co-founding Cryptometrics, Mr. Barra has overseen its expansion from a provider of fingerprint recognition software to a full service biometric security company by acquiring Cryptometrics Canada, Inc. (formerly known as BioDendity Systems Corporation), an Ottawa, Canada-based developer of facial recognition technologies. Prior to co-founding Cryptometrics, Mr. Barra served as a member of the Board of Directors of Globaltex Industries, a publicly traded coal and gold mining company located in British Columbia, Canada, where he developed financial and business plans and led capital formation efforts. From 1991 to 1993, Mr. Barra was President of A.L.M. Associates Corporation, a Delaware-based coal-leasing company where his services were instrumental in the successful completion of a merger of A.L.M. Associates, leading it to become a publicly traded company. From 1985 to 1990, Mr. Barra was Founder, President and Chief Executive Officer of American Health and Nutrition, a company engaged in the financing of nutrition and diet counseling centers. Mr. Barra holds a B.S. degree from St. John’s University and an M.S. in Clinical Nutrition from New York University.

Michael A. Vitale, 45, has over 26 years of experience in executive sales, marketing and operational positions at several companies in the environmental and energy-related industries. Mr. Vitale co-founded Cryptometrics in 2000 and has served as is Co-Chief Executive Officer since that time. Since co-founding Cryptometrics, Mr. Vitale has assisted in Cryptometrics’ expansion from a provider of fingerprint recognition software to a full service biometric security company by acquiring Cryptometrics Canada, Inc. Since 1998, Mr. Vitale has served as the Chairman of the Board of Environmental Recovery and Consolidation Services, a North Reading, Massachusetts-based, leader in the collection, preparation, and pre-sorting of post-consumer materials. Since 2003, Mr. Vitale has also been a member of the Board of Directors of Carpet America Recovery Effort, an industry and government group focused on developing carpet reclamation and recycling methods. From 1993 to 1998, Mr. Vitale served as

the Chief Operating Officer for Tower Recycling, a company contracted by Honeywell International, Armstrong Industries and Collins & Aikman Flooring to manage many of their recycling needs.

Joel M. Shaw, 60, has over 28 years of experience in designing and developing boarder clearance, airport security and document-reading systems. Mr. Shaw is the Chief Strategy Officer of Cryptometrics. Mr. Shaw is the co-author of a patent entitled Security Documents, which deals with securing official travel documents. Mr. Shaw is also one of the authors recently granted a patent entitled Face Imaging System for Recordal and Automated Identity Confirmation, which deals with business capture, processing and recognition. Before its acquisition by Cryptometrics, Mr. Shaw was the founder and chief executive officer of BioDentity Systems Corporation (now known as Cryptometrics Canada, Inc.). Prior to founding Cryptometrics Canada, Inc., Mr. Shaw was the founder and chief executive officer of Business Renewal Corporation from 1995 to 1999. Prior to founding Business Renewal Corporation, Mr. Shaw served as executive vice president of Advanced Information Technology Corporation from 1975 to 1995 where he was chief engineer and his responsibilities included strategic business development.

Mr. Shaw has worked closely with the Canadian passport Office, the U.S. Department of State and the U.S. Immigration and Naturalization Service advising such organizations on issues of boarder control and the issuance of travel documentation. Since 1989, Mr. Shaw has also been the Chairman of the International Standards Organization (ISO) Working Group for the development of standards for machine-readable documents and serves as International Standard Organization (ISO) Working Group’s official liaison with the International Civil Aviation Organization.

JAG Media’s Bylaws provide that its directors shall be elected at JAG Media’s annual stockholders meetings to serve one year terms and until his or her successor shall have been elected and qualified.

Employment Agreements

At the Effective Time of the Merger, the employment agreements of both Robert Barra and Michael A. Vitale (the “Employment Agreements”) with JAG Media (to be renamed Cryptometrics, Inc.) as the corporation surviving the Merger in the form attached hereto as Appendix E will become effective.

The relevant provisions of the Employment Agreements are as follows:


	•	Messrs. Barra and Vitale shall be the Co-Chief Executive Officers of the surviving corporation.

	•	Messrs. Barra and Vitale shall be “at will” employees and each of Messrs. Barra, Vitale and the surviving corporation may terminate the employment relationship, at any time, upon written notice to the other party with or without good cause or reason or no cause or reason.

	•	During the first calendar year of their employment pursuant to this agreement, Messrs. Barra and Vitale shall receive a base salary of $175,000 with a potential bonus of up to $350,000.

	•	During the second calendar year of their employment pursuant to this agreement, Messrs. Barra and Vitale shall receive a base salary of $225,000 with a potential bonus of up to $450,000.

	•	At the Effective Time of the Merger, Messrs. Barra and Vitale shall each receive non-qualified stock options to purchase a total of 325,000 shares of common stock of Cryptometrics, Inc. for $1.00 per share, subject to adjustment in number of shares and purchase price to an option to purchase shares of stock of JAG Media (to be renamed Cryptometrics, Inc.) for a number of shares of JAG Media Common Stock equal to 325,000 times the Exchange Multiple at a set purchase price of $1.00 divided by the Exchange Multiple.

	•	The agreements have provisions providing immediate exercisability of outstanding options and payment of approximately three times their salary and bonuses to Messrs Barra and Vitale in the case of a future takeover of JAG Media.

CAPITAL STOCK OF JAG MEDIA AND CRYPTOMETRICS

DESCRIPTION OF JAG MEDIA CAPITAL STOCK

JAG Media has the authority to issue (i) 500 million (500,000,000) shares of Common Stock par value $0.00001; (ii) four hundred forty thousand (440,000) shares of Class B Common Stock, par value $0.00001, of which four hundred thousand (400,000) shares have been designated Series 2 Class B Common Stock, and forty thousand (40,000) shares have been designated Series 3 Class B Common Stock; and (iii) fifty million (50,000,000) shares of preferred stock, par value $0.00001. As of January 31, 2008, according to its transfer agent JAG Media had (i) 58,508,856 shares of Common Stock issued and outstanding, (ii) 381,749 shares of Series 2 Class B Common Stock, (iii) 21,500 shares of Series 3 Class B Common Stock issued and outstanding, and (iv) no shares of preferred stock issued and outstanding. In addition, issued and outstanding shares of JAG Media’s prior classes of common stock may be converted upon presentation in accordance with the terms of its 2002 and 2004 recapitalizations into 1,683,330 shares of Common Stock.

COMMON STOCK

Each holder of JAG Media Common Stock is entitled to one vote for each share held of record. There is no right to cumulative votes for the election of directors. The shares of Common Stock are not entitled to pre-emptive rights and are not subject to redemption or assessment. Each share of Common Stock is entitled to share ratably in distributions to stockholders and to receive ratably such dividends as may be declared by the Board of Directors of JAG Media out of funds legally available therefor. Upon liquidation, dissolution or winding up of JAG Media, the holders of Common Stock are entitled to receive, pro rata, the assets which are legally available for distribution to stockholders. The issued and outstanding shares of Common Stock are validly issued, fully paid and non-assessable.

SERIES 2 CLASS B COMMON STOCK

Except as required by law, the holders of Series 2 Class B Common Stock are not entitled or permitted to vote on any matter required or permitted to be voted upon by the stockholders of JAG Media. Upon the dissolution, liquidation or winding up of JAG Media, subject to the rights of the holders of any of JAG Media’s securities other than Common Stock, the holders of the Series 2 Class B Common Stock, the Series 3 Class B Common Stock (described below) and the Common Stock will be entitled to receive all of the assets of JAG Media available for distribution to its stockholders ratably in proportion to the number of shares held by them. Holders of Series 2 Class B Common Stock are entitled to receive, on an equal basis, such dividends, payable in cash or otherwise, as may be declared by the Board of Directors of JAG Media out of funds legally available therefor. Each share of Series 2 Class B Common Stock must be redeemed by JAG Media, to the fullest extent permitted by law, within six months (or as soon thereafter as permitted by law) following the final resolution of JAG Media’s lawsuit against certain brokerage firms (JAG Media Holdings, Inc. v. A.G. Edwards & Sons et al) in the U.S. District Court for the Southern District of Texas or any successor or other lawsuit relating to the subject matter thereof in which JAG Media is named as a plaintiff. Although the original lawsuit has been dismissed with prejudice, JAG Media is investigating a successor or other lawsuit relating to the subject matter thereof which would qualify for the mandatory redemption provisions for this class of securities.

SERIES 3 CLASS B COMMON STOCK

Except as required by law, the holders of Series 3 Class B Common Stock are not entitled or permitted to vote on any matter required or permitted to be voted upon by the stockholders of JAG Media. Upon the dissolution, liquidation or winding up of JAG Media, subject to the rights of the holders of any of JAG Media’s securities other than Common Stock, the holders of the Series 2 Class B Common Stock, the Series 3 Class B Common Stock and the Common Stock will be entitled to receive all of the assets of JAG Media available for distribution to its stockholders ratably in proportion to the number of shares held by them. Holders of Series 3 Class B Common Stock are entitled to receive, on an equal basis, such dividends, payable in cash or otherwise, as may be declared by the Board of Directors of JAG Media out of funds legally available therefor. Each share of Series 3 Class B Common Stock must be redeemed by JAG Media, to the fullest extent permitted by law, within six months (or as soon thereafter as permitted by law) following the final resolution of JAG Media’s lawsuit against certain brokerage firms (JAG Media Holdings, Inc. v. A.G. Edwards & Sons et al) in the U.S. District Court for the Southern District of

Texas or any successor or other lawsuit relating to the subject matter thereof in which JAG Media is named as a plaintiff. Although the original lawsuit has been dismissed with prejudice, JAG Media is investigating a successor or other lawsuit relating to the subject matter thereof which would qualify for the mandatory redemption provisions for this class of securities.

PREFERRED STOCK

The Board of Directors of JAG Media is authorized to issue up to 50,000,000 shares of “blank check” preferred stock. From time to time, the Board of Directors of JAG Media may issue, in one or more series, the number of shares and any designation of each series and the voting powers, designations, preferences and relative, participating, optional and other special rights of the shares of each series, and the qualifications, limitations and restrictions of the preferred stock.

DESCRIPTION OF CAPITAL STOCK OF CRYPTOMETRICS, INC. AND ITS CANADIAN SUBSIDIARY, CRYPTOMETRICS CANADA, INC.

COMMON STOCK

Cryptometrics is authorized to issue up to 20,000,000 shares of common stock, par value $0.001 per share (the “Cryptometrics Common Stock”). As of April 30, 2007, 11,981,863 shares of Crytometrics Common Stock were issued and outstanding, including the 1,382,957 Exchangeable Shares of Cryptometrics Canada, Inc. outstanding. Each holder of Cryptometrics Common Stock is entitled to one vote for each share held of record. There is no right to cumulative votes for the election of directors. The shares of Common Stock are not entitled to pre-emptive rights. Each share of Common Stock is entitled to share ratably in distributions to stockholders and to receive ratably such dividends as may be declared by the Board of Directors of Cryptometrics out of funds legally available therefor. Upon liquidation, dissolution or winding up of Cryptometrics, the holders of Cryptometrics Common Stock are entitled to receive, pro rata, the assets which are legally available for distribution to stockholders. The issued and outstanding shares of Cryptometrics Common Stock are validly issued, fully paid and non-assessable.

CANADIAN EXCHANGEABLE SHARES

In connection with the acquisition by Cryptometrics, Inc. for 1,500,000 shares of its common stock of all of the then issued and outstanding shares of common stock of BioDentity Systems Corporation, a Canadian corporation, (now known as Cryptometrics Canada, Inc.), the shares of stock of BioDentity were each converted into 0.1550227 Exchangeable Shares of BioDentity and BioDentity issued to Cryptometrics 100,000 class A common shares which then constituted all of the issued and outstanding class A common shares of Biodentity. The Exchangeable Shares currently outstanding are exchangeable by the holders thereof into a total of 1,382,957 shares of Cryptometrics Common Stock and Cryptometrics has the option to redeem the Exchangeable Shares and the holders of the Exchangeable Shares have the option to exchange them for Cryptometrics Common Stock. Previously outstanding options or warrants of Biodentity were converted into options or warrant to acquire the balance of the 1,500,000 shares of stock of Cryptometrics, i.e. 116,042 shares.

The 1,382,957 shares of Cryptometrics Common Stock for which the outstanding Exchangeable Shares are exchangeable have been treated the same as the outstanding shares of Cryptometrics Common Stock and thus share equally in the Merger Consideration. The options and warrants for the Exchangeable Shares are treated the same as the options as warrants for the Cryptometrics Common Stock.

TRANSFER AGENT AND REGISTRAR

The registrar and transfer agent for JAG Media’s Common Stock is Transfer Online, Inc., Portland, Oregon.

SHARES ELIGIBLE FOR FUTURE SALE

Upon issuance of the shares of JAG Media Common Stock to the Cryptometrics stockholders in connection with the Merger, such shares shall be registered with the SEC on this Registration Statement on Form S-4. In accordance with the terms of the Merger Agreement, however, stockholders of Cryptometrics shall not be permitted

to sell or otherwise dispose of sixty-five percent (65%) of the JAG Media Common Stock received in connection with the Merger for a period of twelve months from the closing date of the transaction. Additionally, the Form S-4 shall separately register the shares of JAG Media Common Stock issuable to the current Co-Chief Executive Officers of Cryptometrics, Robert Barra and Michael A. Vitale, and the current Chief Strategy Officer of Cryptometrics, Joel Shaw, so that the shares are immediately saleable subject to the twelve-month lock-up restriction. Notwithstanding the foregoing, subject to compliance with all relevant securities laws, thirty-five percent (35%) of the shares of JAG Media Common Stock issued to the Cryptometrics stockholders in connection with the Merger shall not be subject to the twelve-month lock-up provision.

COMPARISON OF STOCKHOLDERS’ RIGHTS

Cryptometrics is incorporated in the State of Delaware. Stockholders of Cryptometrics, whose rights as stockholders are currently governed by Delaware law and Cryptometrics’ Certificate of Incorporation and By-Laws, will, upon effectiveness of the Merger become stockholders of a Nevada corporation, and their rights will be governed by Nevada law and JAG Media’s Articles of Incorporation, and By-Laws. Although it is impractical to note all of the changes in the rights of the stockholders of Cryptometrics resulting from the Merger, the following is a summary of the more significant of such changes.

STOCKHOLDER VOTING ON FUNDAMENTAL CHANGES

In Delaware and Nevada the laws pertaining to the stockholder vote required for a fundamental corporate change such a Merger or sale of substantially all the corporation’s assets are the same. In both Delaware and Nevada, a simple majority (greater than 50%) stockholder vote is required to effect a corporation’s Merger or sale of substantially all of its assets.

STOCKHOLDER ACTION WITHOUT A MEETING

Also, in both Delaware and Nevada a corporate action requiring stockholder approval may be taken without a meeting if a majority of the stockholders entitled to vote thereon consent to such action in writing.

APPRAISAL RIGHTS

In Nevada and Delaware, appraisal rights are similar.

In Nevada, if (i) the securities of the class entitled to vote are listed on a national securities exchange or are included in the Nasdaq Capital Market or (ii) if there are more than 2,000 stockholders of records, there is not an appraisal right where the Merger is (x) with another company listed on a national securities exchange or the Nasdaq Capital Market or (y) where such company has 2,000 stockholders and nothing other than cash or stock or a combination is being tendered in the Merger.

In Nevada, if corporate action is taken without a meeting of the stockholders, the corporation shall notify in writing all stockholders entitled to dissent that the action was taken and shall send them a written dissenter’s notice within 10 days after effectuation of the Merger or business combination, setting forth the procedure for the dissenting stockholders to follow to make demand for payment. The corporation shall pay the fair value of the dissenting stockholders’ shares, as determined by the corporation, within 30 days of demand of payment.

In Delaware, no appraisal rights are available for the shares of any class or series of stock in connection with a Merger or consolidation if (i) the securities of the class entitled to vote are listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or (ii) held of record by more than 2,000 stockholders. Furthermore, no appraisal rights are available for any shares of stock of a constituent corporation surviving a Merger if the Merger did not require for its approval the votes of the stockholders of the surviving corporation.

In Delaware, if corporate action is taken without a meeting of the stockholders, the corporation shall notify, in writing, all stockholders entitled to dissent that the action was taken and shall send them a written dissenter’s notice within 10 days after effectuation of the Merger, setting forth the procedure for the dissenting stockholders to follow

to make demand for payment. Within 20 days of the receipt of the notice of by the corporation that the action was taken, the stockholders must deliver a written demand for payment.

Within 120 days after the completion of the Merger, any stockholder who has complied with Section 262 of the Delaware General Corporation Law may file a petition in the Delaware Court of Chancery demanding determination of the value of the shares held by all stockholders entitled to appraisal of their shares. If a petition for appraisal is duly filed by a stockholder and a copy is delivered to the company, the company will then be obligated within 20 days of receipt of the copy to provide the Court of Chancery with a duly verified list containing the names and addresses of all stockholders who have demanded an appraisal of their shares and with whom agreement as to the value of their shares has not been reached. After notice to these stockholders, the Delaware Court of Chancery is empowered to conduct a hearing to determine which stockholders are entitled to appraisal rights.

The Delaware Court of Chancery will then appraise the shares of stock, determining their fair value exclusive of any element of value arising from the accomplishment of the Merger. When the value is determined, the Delaware Court will direct the payment by the company of this value, with interest thereon, simple or compound, if the Delaware Court of Chancery so determines, to the stockholders entitled to receive this money. For a description of the rights of Cryptometrics stockholders in connection with the Merger, please see the section entitled “Appraisal Rights” on page 25 of this Form S-4.

CORPORATE GOVERNANCE

Except as noted below, corporate governance laws and procedures in Nevada and Delaware are different:

In Nevada, directors may be removed by a vote of 2/3rds of the stockholders entitled to vote, whereas in Delaware, unless the corporation’s charter documents provide otherwise, directors may be removed by a majority vote of the stockholders entitled to vote for such purpose. Absent contravening or limiting provisions in the charter or bylaws of a corporation, both states permit vacant director positions to be filled by appointment of the remaining Board of Directors.

In Nevada, the Board of Directors, without a vote of the stockholders, may approve and effectuate a reverse split or recapitalization of the outstanding shares on a pro rata basis. In Delaware, the law requires a stockholder vote to accomplish a reverse split of shares.

In Nevada, a person holding or representing 15% or more of the outstanding shares of a corporation may, on at least 5 days’ notice, inspect the books and financial records of the corporation. In Delaware, any stockholder may, during reasonable business hours and upon 5 days written notice, inspect the books and financial records of the corporation.

TAKEOVER BIDS

In Nevada, unless the Articles of Incorporation provide that the anti-takeover sections of the Nevada Revised Statutes do not apply any person or group acting together who acquires one fifth or more of the outstanding shares of the company (the “Control Shares”) must submit a take over statement to the other stockholders. The Control Shares may not be voted in any takeover attempt, unless a resolution authorizing the Control Shares to so vote is passed by a majority of the non-Control Shares.

In Delaware, unless otherwise provided by a corporation’s certificate of incorporation, a corporation shall not engage in any business combination with any interested stockholder for a period of 3 years following the time that such stockholder became an interested stockholder, unless: (i) prior to such time the Board of Directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; (ii) consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned (a) by persons who are directors and also officers and (b) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or (iii) at or subsequent to such time the business combination is approved by the Board of Directors and

BUSINESS OF JAG MEDIA

OVERVIEW OF JAG MEDIA’S BUSINESS

JAG Media has been providing financial and investment information within the investment community since 1989. In May 1999, JAG Media began offering its services on a subscription fee basis to the general public for the first time through its U.S. website. At www.jagnotes.com, JAG Media offers timely financial data and reports and commentary from the financial community.

From 1989 to 1992, JAG Media operated as an unincorporated business entity. In 1992, JAG Media incorporated in the State of New Jersey as New Jag, Inc. On December 14, 1993, JagNotes, Inc. merged with and into JAG Media, and the company changed its name to JagNotes, Inc. JAG Media operated as JagNotes, Inc. until March 1999 when it was acquired by Professional Perceptions, Inc., a Nevada corporation, which subsequently changed its name to JagNotes.com Inc. JagNotes, Inc. remained a wholly-owned subsidiary of JagNotes.com Inc. until August 16, 1999 when it merged with and into JagNotes.com Inc.

Until 1999, JAG Media targeted only a limited audience of financial professionals and it did not engage in organized sales and marketing efforts. As discussed in more detail below, in 1999 JAG Media decided to change its focus by expanding onto the Internet and targeting retail subscribers with the hope of expanding its subscriber base and business. In September 2000, JAG Media started an advertiser-based financial web cast which it sold on February 1, 2001 as it was unable to continue to fund its operating losses.

JAG Media undertook a corporate reorganization in January 2002 in order to distinguish and better manage its areas of business. On January 4, 2002, JAG Media LLC was formed as a Delaware limited liability company and a wholly owned subsidiary of JagNotes.com, Inc. The assets and liabilities of JAG Media’s current fax and Internet subscription business were transferred to JAG Media LLC. In order to better reflect the overall business in which JAG Media expected to engage and the corporate structure JAG Media intended to use to conduct that business, the company changed its corporate name from JagNotes.com Inc. to JAG Media Holdings, Inc. effective April 8, 2002.

JAG Media’s jagnotes.com website currently consists of a subscription-based service that offers two specific products, the JAGNotes (Upgrade/Downgrade) Report and the Rumor Room, providing timely market reports, including breaking news and potentially market moving information. JAG Media currently derives its revenues primarily from the sale of subscriptions.

JAG Media, through its subsidiary, Pixaya (UK) Limited, purchased certain development stage software and related assets in the United Kingdom on November 24, 2004. On August 8, 2006, JAG Media changed the name of its subsidiary, JAG Media, LLC, to Pixaya LLC in order to better reflect its role as owner of Pixaya (UK) Limited as well as the primary provider of support for the products of Pixaya (UK) Limited in the United States. JAG Media continued to finance the development and marketing by Pixaya (UK) Limited of one product, a mobile surveillance system which streams live video in real time from the point of use back to a control center and, if desired, to other locations. JAG Media has only made minimal sales of such product as part of its distribution efforts. Due to the lack of funding, Pixaya (UK) Limited is currently inactive.

JAG Media has also decided to seek acquisition candidates which may be engaged in unrelated lines of business. See “— Our Business Strategy”.

JAG Media is a Nevada corporation. JAG Media’s address is 6865 S.W. 18th Street, Suite B13, Boca Raton, Florida 33433, and its telephone number is 866-300-7410.

JAG MEDIA’S INDUSTRY GENERALLY

The growth of the Internet has changed the way investors seek information and manage their portfolios. Individual investors are increasingly seeking access to information that was formerly available only to financial professionals. Professional investors who have traditionally relied on print and other media for information are demanding faster information and greater accessibility.

As of August 2007, there were over one billion Internet users worldwide, including over 212 million users in the United States, representing a 70% penetration. See Internet World Stats website (http://www.internetworldstats.com).

According to tracking surveys conducted by Pew Internet & American Life Project as of November 2004, approximately 44% use the Internet to obtain financial information and approximately 13% use the Internet to buy or sell stocks, bonds or mutual funds. (http://www.pewinternet.org/trends/Internet_Activities_3.02.05.htm). An updated Pew study published June 14, 2006 has confirmed that the 44% user rate for financial information has remained generally constant from 2000-2005. (http://www.pewinternet.org/pdfs/PIP_Online_Banking_2006.pdf).

With respect to JAG Media’s Pixaya business unit, which is currently inactive, the mobile and wireless industries are experiencing significant growth and changing the way businesses operate and people communicate. Both industries are also giving rise to new forms of mobile entertainment, communication and information not available just a few short years ago. As of December 31, 2005 there were more than 200 million wireless subscribers in the U.S. and reported wireless minutes of use exceeded 1.4 trillion in 2005. By the end of 2006 there were over 233 million users and reported wireless minutes of use exceeded 1.6 trillion. (http://files.ctia.org/pdf/ CTIA_Survey_Year_End_2006_Graphics.pdf). By June 2007, there were over 243 million users in the U.S. and reported wireless minutes of use in 2007 had reached one trillion by halfway through the year. (http://files.ctia.org/pdf/CTIA_Survey_Mid_Year_2007.pdf).

In addition, wireless carriers are updating their networks and are in the process of deploying their next-generation high-speed broadband networks, commonly referred to as 3G. Sprint, whose technology is based on the CDMA standard, intends to have its EVDO Rev A high-speed broadband network substantially deployed by the end of 2007 (http://www.mobiletechnews.com/info/2006/08/03/104744.html). Such 3G networks will significantly improve uplink and downlink speeds, thereby providing an enhanced user experience when viewing video, accessing the Internet or working with any large data files.

JAG MEDIA’S PRODUCTS

JAG Media’s jagnotes.com website consists solely of a subscription-based service. During its fiscal year, ended July 31, 2006, JAG Media discontinued the free portion of its website.

JAG Media offers its subscribers two targeted products: The JAGNotes (Upgrade/Downgrade) Report, targeted primarily at institutional subscribers, and the Rumor Room, targeted primarily at retail individual customers. These two products are accessible only to paid subscribers. Subscriptions are offered to individuals at the rate of $9.95 per month, or $99.95 per year. JAG Media has offered free trial subscriptions at times in the past and may do so in the future.

JAGNOTES (UPGRADE/DOWNGRADE) REPORT — The JAGNotes Report is a daily consolidated investment report that summarizes newly issued research, analyst opinions, upgrades, downgrades and analyst coverage changes from various investment banks and brokerage houses. Each morning JAG Media gathers this information, then compiles and releases it in a concise, easy to read format before the markets open. JAG Media believes that this report gives early, convenient access to its subscribers of potentially market moving information which was traditionally not available in a convenient format when the market opens. This report is updated from time to time during the trading day.

JAG Media’s current strategy involves phasing out retail subscribers for its JAGNotes Report and refocusing on institutional customers and professional traders. JAG Media has always maintained its original JAGNotes fax-based service for a limited number of mostly institutional subscribers. Through this service, JAG Media provides these subscribers faxed copies of its daily JAGNotes Report, which is provided through installments as information is received every weekday morning before the stock market opens. JAG Media also allows these subscribers access to its Internet-based information by providing them with a specified number of access codes. The price for this combined service is approximately $1,500 to $2,150 per year. The content of its website contains substantially all of

the information provided in the faxed reports as well as updates of such information and the Rumor Room described below.

JAG Media intends to continue providing its combined fax/Internet service in the future primarily to institutional subscribers. JAG Media believes that some financial institutions are willing to pay a higher price for this combined service because they consider a faxed report to be a more user friendly means of receiving the information even if their employees have direct Internet access.

While JAG Media intends to focus its efforts exclusively on offering the JAGNotes Report to institutional customers, JAG Media recognizes that it remains of interest to some retail customers as well. However, to avoid the cost of accessing such individuals JAG Media expects to do so almost exclusively through strategic affiliations such as its current arrangement with Track Data, as described under “Our Business Strategy”, below.

THE RUMOR ROOM — Because rumors can move equities, JAG Media has established the Rumor Room where JAG Media posts rumors that have been heard on the street about various stocks. When JAG Media hears rumors, JAG Media posts the information in the Rumor Room and indicates the date and time of the rumor. While JAG Media realizes that rumors are inherently unreliable as indicated by a cautionary note introducing this portion of its site, JAG Media believes that every trader and investor — large and small — should have access to this information to determine its usefulness. The Rumor Room is available to its subscribers and updated whenever JAG Media receives relevant information.

Although targeted primarily at individual subscribers, the Rumor Room is also made available through JAG Media’s website to institutional investors as described above. As described below, if JAG Media can obtain funding and its English subsidiary, Pixaya, can complete development of its Pixaya Mobile software product, which delivers on-demand video/audio clips and text messages to mobile phones, JAG Media intends to try to distribute the Rumor Room through mobile phones as well. JAG Media believes such a distribution channel might better access its target audience. There can be no assurance, however, that such development will be successfully completed or, if completed, that customers will embrace this new mode of distribution. For the time being, JAG Media has stopped further development of this product in light of its lack of liquidity.

PIXAYA — On November 24, 2004, through its English subsidiary now named Pixaya (UK) Limited, JAG Media purchased certain development stage software and related assets from TComm Limited, a company also organized in the United Kingdom. At the time of acquisition, TComm Limited was in various stages of development of four software products. The one product JAG Media continued to develop is SurvayaCam (previously CCMTV), which consists of software programs and related hardware intended to permit field personnel to send real-time video streams from the field to a central location (or multiple locations) where they can be viewed. JAG Media is also now attempting to market SurvayaCam through demonstrations and pilot program deployments of the product. Some pilot programs involved JAG Media providing SurvayaCam software and hardware free of charge, while others involved the purchase of SurvayaCam at a discount price. In addition, JAG Media has attempted to develop a network of resellers who could function as the primary distribution channel for SurvayaCam. JAG Media has only made minimal sales of such product as part of such distribution efforts.

Due to its lack of funding, JAG Media has for the time being discontinued further developing Pixaya Mobile (previously known as TComm TV), which delivers on-demand video/audio clips and text messages to various Java-based and Symbian-based mobile phones. JAG Media has discontinued its support of the other three products it originally acquired. In addition, after the acquisition JAG Media first supported and then had to suspend development of a new mobile phone product named “SOS Guides,” which are mobile travel guides that will be made available to users through their mobile phones.

ADVERTISING REVENUE

While JAG Media expects the primary source of its revenue to be from subscriptions for its JAGNotes Report and the Rumor Room, JAG Media may supplement this with advertising revenue. Such revenues have, however, not been meaningful to date. JAG Media would not expect such revenues to become material until (i) there is a major upturn from current levels in Internet banner advertising generally or JAG Media is able to offer advertisers various

media advertising alternatives to banners and (ii) JAG Media has been successful in increasing the number of unique visitors to its website.

JAG MEDIA’S BUSINESS STRATEGY

The success of JAG Media’s business depends on its ability to obtain the requisite financing and be able to:


	•	improve its revenues;

	•	curtail costs to correspond with its revenues; and

	•	pursue merger and other expansion opportunities.

JAG Media’s strategy to improve its revenues has not been effective to date, as its revenues have declined and leveled off at a level which cannot support the cost of such revenues. While pursuant to its strategy JAG Media has taken steps to curtail costs, it does not believe it is practicable to further curtail costs to the level that they will correspond with its revenues. Accordingly, while JAG Media has not abandoned its revenue and cost strategies, the primary focus of its strategy is the pursuit of merger and other expansion opportunities. Accordingly, JAG Media has principally used its limited available funds to support its attempts to find and consummate a merger, with a modest amount also being used to support Pixaya’s SurvayaCam, as JAG Media believes it has the best potential for the most immediate revenue return. JAG Media’s strategy is to continue such an allocation of its limited funds.

In order to put itself in a position to implement its increased revenue and cost curtailment strategy if it obtains the requisite financing, JAG Media intends to try to re-position its two basic products so they are targeted more effectively at their respective markets: institutional customers (JAGNotes Report) and retail customers (the Rumor Room). In time, JAG Media hopes that by refocusing its products on specific customer groups, JAG Media may become a more important information resource both for institutional customers, such as investors, brokers and investment advisers, and for individual retail customers.

• Increase Revenues.

JAG Media believes the institutional market for the JAG Notes Report, provided it has sufficient funds available to improve its content and distribution, offers an opportunity to achieve higher revenues at lower per unit cost than the retail market JAG Media has been pursuing. Accordingly, with respect to its JAGNotes Report, JAG Media plans to focus on servicing the institutional segment of its business. To assist JAG Media in this effort, if it has the requisite funding, JAG Media intends to investigate ways of using the Internet more effectively in distributing its product to the institutional market and help those customers in turn redistribute the product to their professional employees. Also, in order to access individual professional traders without incurring excessive marketing costs, JAG Media intends to pursue strategic affiliations, partnerships, joint ventures or other relationships with strategic partners, such as its current arrangements with Track Data, Comtex, Inc. and Acquire Media Corporation, financial information platforms for professional traders, whereby they offer its JAGNotes Report as part of their collection of subscriber services to the professional trading community. JAG Media has not, however, recently been successful in adding additional strategic partners.

With respect to the Rumor Room service, JAG Media believes that developing technologies, such as mobile phones, may give it a better distribution channel which can make the individual customer market for the Rumor Room cost effective as well, assuming JAG Media can obtain the necessary funds to improve the content and distribution of the product. If JAG Media is able to fund development of its Pixaya mobile software, it will explore the feasibility of using mobile phones as a new distribution channel for its Rumor Room service.

Finally, as part of its strategy to increase revenues, since JAG Media believes that SurvayaCam has been developed to the point where JAG Media can do sales demonstrations and pilot program deployments, JAG Media has made efforts to distribute such product, but has not been successful to date.

• Curtail Costs.

JAG Media sold its web casting business and discontinued its efforts to market its Company Voice product to reduce its cash flow requirements. In addition, JAG Media has discontinued all its paid commentators and all but

two of its employees in order to save costs. Finally, JAG Media has had to deactivate its Pixaya business unit for the time being to curtail costs.

JAG Media is not aware of further costs which can be curtailed at this point. Many of our general and administrative costs are related to being a public company and these costs are difficult to reduce in light of the recent Sarbanes-Oxley legislation and its new requirements. While JAG Media will continue to look for cost savings and intends as well to explore ways to reduce cash expenditures through the issuance of shares, it does not believe it is possible as a practical matter to reduce costs on an accrual or cash basis to a level commensurate with its current or expected revenues.

• Pursue Merger and Other Expansion Opportunities.

This portion of JAG Media’s strategy represents its highest priority.

JAG Media has looked at various possible acquisitions over the past three years. Over that period JAG Media has increased its efforts to find a compatible merger candidate and has considered dividing its business to help jump start its growth and perhaps attain access to more funding sources. A merger candidate need not be in JAG Media’s specific line of business, but could be in another line of business related to the stock market or software or it could be in an unrelated line of business. JAG Media’s current strategy is to not foreclose any attractive candidate based upon its line of business.

JAG Media is also are pursuing the possibility, subject to available funding, of spinning off one of its two major services in order to maximize the chances of successfully developing both such services by focusing them on their respective target customer bases.

Pursuant to the above strategy, JAG Media has located a possible merger candidate, Cryptometrics, Inc. While there can be no assurance that the transaction will ever be consummated, on December 27, 2005 JAG Media entered into a merger agreement, which was subsequently amended from time to time by amendments dated January 24, 2007, February 26, 2007, April 2, 2007, April 20, 2007, May 11, 2007, May 18, 2007, June 15, 2007, July 16, 2007, August 16, 2007, November 7, 2007 and February 6, 2008 with Cryptometrics pursuant to which Cryptometrics would merge with JAG Media’s newly created subsidiary. In consideration of the Merger, the stockholders of Cryptometrics would acquire 394,700,016 shares of JAG Media common stock which would, upon issuance, represent approximately 87% of JAG Media’s outstanding common stock, in exchange for all of the issued and outstanding capital stock of Cryptometrics. In such case, JAG Media’s existing public stockholders would experience significant dilution from the issuance of such shares to the stockholders of Cryptometrics. If consummated, the transaction would be accounted for as a reverse acquisition in which Cryptometrics would be deemed the acquirer for accounting purposes. Because of the financial performance of JAG Media, if the Merger is consummated there can be no assurance that the new management of JAG Media (to be renamed Cryptometrics, Inc.) will continue all or any of JAG Media’s current lines of business.

Until JAG Media agrees otherwise, the Merger Agreement may be canceled with or without any reason by either JAG Media or Cryptometrics with no liability. In any case, the Merger Agreement will automatically terminate if the closing does not occur by March 31, 2008, unless the parties otherwise agree to extend such date. Additionally, the consummation of the Merger is subject to various conditions set forth in the Merger Agreement, including, among others, (i) the representations and warranties of the parties being true and correct (ii) JAG Media’s shares of common stock having been authorized for trading on the OTC Bulletin Board or the OTC Pink Sheets and (iii) the limitation of JAG Media’s aggregate indebtedness to $4,350,000. There is no assurance that the proposed Merger between JAG Media and Cryptometrics will be consummated, or if it is consummated, that it will be pursuant to the terms described above.

The Merger Agreement, including the amendments thereto, are included as Appendices C-1 through C-12 to this Consent Solicitation/Prospectus and should be reviewed for further information regarding the Merger.

JAG Media has considered a possible spin off of either the Rumor Room, together with its related Pixaya Mobile software development business, or the JAGNotes Report. Any such spin off might possibly be done in connection with a merger with another enterprise which may be in an unrelated line of business. JAG Media believes its two products might be better repositioned and developed as their own corporate entities which might also appeal

to different investors. JAG Media is not currently considering any spin off and has not entered into any term sheet in connection with any merger related to such a spin off. There can be no assurance that any such spin off, with or without a merger, will prove feasible or be consummated.

JAG Media will require additional funds in order to implement its business strategy. At its current usage rate of cash, the cash generated from JAG Media’s operations will not be sufficient to fund the liquidity requirements of its current business strategy. Accordingly, JAG Media will need to raise additional funds through public or private financing, strategic relationships, mergers or other arrangements. There can be no assurances that JAG Media will be able to do so.

Note: These are JAG Media’s strategies, goals and targets. JAG Media believes in them, but cannot guarantee that it will be successful in implementing them or that, even if implemented, they will be effective in creating a profitable business. Strategies that in the past JAG Media thought would be successful have not proven effective. In addition JAG Media is dependent on having sufficient cash to carry out its strategy. Alternatively, JAG Media may have to continue to reduce services to a level subscribers or customers may not find valuable. Please read “Risk Factors” beginning on page 12.

REGULATION

The securities industry is subject to extensive regulation under federal and state laws in the United States, and companies that provide financial advice to investors are generally required to register as investment advisers at either the federal or state level. JAG Media believes that its business consists of a publishing activity for which investment adviser registration and regulation do not apply under applicable federal or state law, and thus JAG Media is not registered as an investment adviser with either the SEC or any of the various states. The regulatory environment in which it operates is subject to change, however, and JAG Media could be required to register as an investment adviser with an appropriate regulatory agency at some point in the future.

In addition, JAG Media operates in an environment of uncertainty about potential government regulation of the Internet and Internet-based service providers. JAG Media believes that its business is not currently subject to direct regulation other than regulations applicable to businesses generally. However, the Internet is evolving rapidly, and governmental agencies have not yet been able to adapt all existing regulations to the Internet environment. The United States Congress has passed legislation that regulates certain aspects of the Internet, including on-line content, copyright infringement, user privacy, liability for third-party activities and jurisdiction. Specifically, with respect to one aspect of copyright law, on October 28, 1998, the United States Congress passed the Digital Millennium Copyright Act (“DMCA”). The DMCA includes statutory licenses for the performance of sound recordings and for the making of recordings to facilitate transmissions. Under these statutory licenses, depending on JAG Media’s future business activities, it and its customers may be required to pay licensing fees in connection with digital sound recordings which JAG Media might deliver to its customers. Additionally, federal, state, local and foreign governmental organizations also from time to time consider other legislative and regulatory proposals that would regulate the Internet. Although JAG Media is also contemplating distribution by mobile phone, that sector is also regulated.

JAG Media cannot predict what new laws will be enacted or how courts will interpret both existing and new laws. As a result, JAG Media is uncertain as to how new laws or the application of existing laws may affect its business. For example, while JAG Media is not aware of any pending laws or regulations that would restrict its ability to disseminate market-based rumors and other information of unsubstantiated reliability, it is possible that such laws or regulations may be passed in the future. Increased regulation in this area could decrease the demand for its services, increase its cost of doing business or otherwise have a material adverse effect on its business, results of operations and financial condition. In addition, the ways in which internet companies deal with copyrighted content which appears on their sites are in flux.

COMPETITION

Providing financial information and analysis over the Internet is an intensely competitive business. A large number of web-based financial information providers are competing for subscribers, customers, advertisers,

content providers, analysts, commentators and staff. In addition, cable television is an increasingly important source of financial news and therefore competition.

JAG Media’s business competes to a different degree with the following information sources, many of which provide their information without charge:


	•	Online financial news and information providers including Yahoo Finance, Marketwatch, TheStreet.com, Forbes.com, Briefing.com, America Online Personal Finance, Reuters and MotleyFool.com;

	•	Internet portals and search engines such as AOL, MSN and Yahoo;

	•	Traditional media sources such as The Wall Street Journal, Investor’s Business Daily, The Financial Times, Barrons, CNN/Money, and MSN Money/CNBC, all of which also have an Internet presence;

	•	Terminal-based financial news providers including Bloomberg, Reuters and Dow Jones; and

	•	Online brokerage firms such as TD Ameritrade, E*Trade Financial, Charles Schwab and Fidelity.

Because there is not a readily defined market in which JAG Media competes, it cannot predict which information source or sources will be its primary competition in the future. However, JAG Media expects competition from each of the above information sources to intensify and increase in the future. Most of JAG Media’s current and potential competitors have greater name recognition, larger financial, technical and marketing resources, and more extensive customer bases than it does, all of which could be leveraged to gain market share to our detriment. Such advantages would also permit its competitors to enter new sectors such as distribution through mobile phones, more easily than we will be able to do.

It is not difficult for new competitors to enter the market. Many blogs now provide financial information at no cost. Much of the information JAG Media provides is publicly available and it does not have any patented or otherwise protected technologies that would preclude or inhibit competitors from entering its markets. JAG Media’s current and future competitors may develop or offer services that have significant price, content, creative or other advantages over the services JAG Media provides.

In order for JAG Media to successfully compete in this business, it will need to reliably provide valuable services to a greater number of institutional and other subscribers who are willing to pay JAG Media fees sufficient to support such services. JAG Media believes that over time, if it can obtain sufficient funding, a successful implementation of its business strategy will allow JAG Media to compete successfully as a focused provider of timely investment information to institutional and retail customers.

INTELLECTUAL PROPERTY

JAG Media is the owner of the trademarks JAG NOTES — AHEAD OF THE MONEY, STREETSIDE and STREETSIDE WITH DAN DORFMAN. Each of the foregoing trademarks was approved in 2002 and has a duration period of ten years, at which time each of the trademarks must be renewed or they will expire. JAG Media does not consider these trademarks to be material to its business.

WEBSITE TECHNICAL INFORMATION

JAG Media leases one web server, which is the computer system on which all the content for its jagnotes.com website is maintained and through which it operate our jagnotes.com website. JAG Media’s U.S. server is maintained by Woodbourne Solutions and is located at their facility in Germantown, Maryland.

JAG Media’s Pixaya website is hosted by InnoTech. InnoTech has offices located in southern California and Raleigh, North Carolina. JAG Media’s Internet data center is located in Orange County, California. The Pixaya website is maintained internally by Pixaya employees.

EMPLOYEES

As of January 31, 2008, JAG Media had two employees. As of that date, JAG Media had entered into employment agreements with its two employees, who are its executives.

FACILITIES

JAG Media’s executive and administrative headquarters are currently located at 6865 SW 18th Street, Suite B13, in Boca Raton, Florida. JAG Media rents this space at a cost of $1,250 per month. The servers for JAG Media’s websites are housed at separate locations as indicated above (see “Website Technical Information”). JAG Media believes that it will be able to locate suitable new office space and obtain a suitable replacement for its Florida office space, if the lease is not renewed on commercially reasonable terms.

LEGAL PROCEEDINGS

On June 20, 2002, JAG Media and its President and Chief Executive Officer, Gary Valinoti, filed a complaint in the 165th District Court of Harris County, Texas against over 150 brokerage firms, alleging, among other things, a conspiracy among the defendants to short sell JAG Media stock. The original lawsuit was subsequently amended on June 24, 2002 and was removed to the United States District Court for the Southern District of Texas. The plaintiffs subsequently filed a motion in the United States District Court for the Southern District of Texas to have the action remanded back to the state court where it was originally commenced. That motion was denied and the action proceeded in the federal district court. On October 1, 2003, the Court denied various motions to dismiss made on behalf of the defendants. However, in its ruling, the Court indicated that all motions to dismiss could have been granted in light of the defective pleadings made by plaintiffs and allowed plaintiffs 20 days to file an amended complaint to comply with certain pleading requirements of the Court. Plaintiffs filed an amended complaint within the required period. Discovery was stayed while the motions to dismiss were pending.

After plaintiffs filed their third amended complaint, 78 out of the total of approximately 150 defendants again filed a motion to dismiss the lawsuit. On September 6, 2004, the Court entered an order granting the moving defendants’ motion to dismiss the lawsuit, again citing various deficiencies in the pleadings. The Court did not grant the plaintiffs leave to replead.

The plaintiffs and the moving defendants have since stipulated to the entry of a final judgment dismissing the third amended complaint against the moving defendants with prejudice. Under this stipulation, the parties agreed on entry of final judgment to (a) waive their right to attorneys fees or seek sanctions and bear their own costs and (b) not appeal the judgment.

On December 3, 2004, JAG Media announced that its original counsel had assigned its legal retainer agreement in connection with the lawsuit to a legal consortium consisting of various law firms and other consultants throughout the country, which includes JAG Media’s original counsel. JAG Media has met with its new attorneys and continues to evaluate with them its options for recommencing an action against certain defendants and possibly other parties in light of the court’s order.

EQUITY LINE OF CREDIT WITH YA GLOBAL.

As of April 9, 2002, JAG Media entered into, and on July 8, 2004 and July 21, 2004, JAG Media amended, an Equity Line Purchase Agreement with YA Global Investments, L.P., then known as Cornell Capital Partners, L.P., for a $10 million equity line pursuant to which JAG Media was able to sell its shares of common stock to YA Global from time to time. The purpose of such sales was to provide JAG Media with general working capital, including funds which might be required by virtue of its strategic plan. This agreement superseded JAG Media’s original equity line purchase agreement with YA Global, dated August 17, 2001. Effective May 25, 2006, as a condition of a new financing from YA Global, JAG Media terminated the Equity Line Purchase Agreement with YA Global, which had been scheduled to expire on August 28, 2006. As of its termination, $4,035,000 of our equity line had been utilized.

$2,000,000 PROMISSORY NOTE

On February 2, 2005 JAG Media borrowed $2,000,000 from YA Global. The $2,000,000 loan was evidenced by a Promissory Note dated as of January 25, 2005 executed by JAG Media and YA Global, the repayment of which was subsequently extended on August 5, 2005. JAG Media used the proceeds of the loan for working capital and general corporate purposes.

Under the terms of the Promissory Note, as amended, the face amount of the Promissory Note and interest on the amount from time to time outstanding at a rate of 12% per year was payable either (i) out of the net proceeds to be received by JAG Media upon delivery of put notices under the Equity Line Purchase Agreement with YA Global or (ii) in full by JAG Media within 753 calendar days of January 25, 2005 regardless of the availability of proceeds under the Equity Line Purchase Agreement, unless an extension were mutually agreed to by the parties in writing. Pursuant to the Promissory Note, JAG Media deposited in escrow 35 put notices under the Equity Line Purchase Agreement in an amount of $60,000 each and one request for a put under the Equity Line Purchase Agreement in an amount of $181,017. None of such put notices was ever released from escrow until they were all returned to JAG Media for cancellation. JAG Media paid to YA Global a fee of $100,000 in connection with this transaction as well as a $5,000 documentation fee.

As permitted by the terms of the Promissory Note, JAG Media opted to make three (3) interest payments to YA Global, each in the amount of $20,000, paid in a single lump sum of $60,000 on August 5, 2005.

CONVERTIBLE DEBENTURES

Effective May 25, 2006, pursuant to a letter agreement with YA Global, JAG Media converted $250,000 of the outstanding $2,000,000 principal of the Promissory Note into 1,250,000 shares of its common stock which JAG Media issued to YA Global. JAG Media converted the remaining $1,750,000 of the principal of the Promissory Note and $150,000 in accrued and unpaid interest into a $1,900,000 10% Secured Convertible Debenture which JAG Media also issued to YA Global on May 25, 2006.

In addition to refinancing its existing Promissory Note dated January 25, 2005, as amended August 5, 2005, in favor of YA Global, in May 2006 JAG Media obtained further financing in the principal amount of $2,250,000 from YA Global. In connection with all such financings, JAG Media issued three secured convertible debentures, bearing interest at 10% per year and payable in three years, in the aggregate principal amount of $4,150,000.

JAG Media may, in its sole discretion, redeem any and all amounts owed under such secured convertible debentures provided that the closing bid price of its common stock is less than the fixed conversion price, initially $0.40 per share, at the time JAG Media delivers notice to YA Global of its desire to redeem any amounts owed. JAG Media must pay a redemption premium of 10% on any amounts redeemed.

In connection with the $2,250,000 financing, JAG Media and its subsidiary, Pixaya LLC, entered into Security Agreements with YA Global effective May 25, 2006, which provide that the secured convertible debentures will remain secured by JAG Media’s assets and those of Pixaya LLC until the registration statement covering the shares into which such secured convertible debentures are convertible has been effective for 60 days. At such time, the security interests will automatically terminate provided JAG Media’s common stock is trading on the Nasdaq OTC Bulletin Board at a price above $0.08 per share and there has occurred no event of default under the secured convertible debentures.

YA Global has the right to convert the secured convertible debentures, at its sole option, into shares of JAG Media’s common stock at a conversion price which shall be the lower of (i) $0.40 per share or (ii) a 10% discount to the lowest volume weighted average price, as reported by Bloomberg, of JAG Media’s common stock during the 30 trading days prior to the conversion date.

If JAG Media issues shares of common stock or rights, warrants, options or other securities or debt that are convertible into or exchangeable for shares of common stock, being common stock equivalents, entitling any person to acquire shares of common stock or common stock equivalents, at a price per share less than the then fixed conversion price, then, at the sole option of the holder of a debenture, the fixed conversion price shall be adjusted to mirror the lower conversion, exchange or purchase price for such new common stock, or common stock equivalents, at issue. No such adjustment shall be made as a result of issuances and exercises of options for compensatory purposes under our 1999 Long-Term Incentive Plan. The fixed conversion price of the secured convertible debentures is also subject to adjustment in connection with certain corporate transactions.

YA Global may not convert the secured convertible debentures into an amount of shares of JAG Media’s common stock that would result in it owning in excess of 4.99% (subsequently amended to 9.99%) of the then total outstanding shares of its common stock, unless YA Global chooses to waive such restriction, which waiver would be

subject to a 65-day notice period. See “Risk Factors” for a description of the special risks posed by our issuance of the secured convertible debentures.

JAG Media paid YA Global a commitment fee equal to 10% of the disbursements of $2,250,000 at closing, as well as a $15,000 structuring fee and their counsel’s fee of $15,000.

There were two conversions aggregating $75,000 for 404,955 shares of JAG Media’s common stock under one of the secured convertible debentures during its fiscal year ended July 31, 2006 and conversions aggregating $555,000 for 4,432,111 shares under the same debenture during its fiscal year ended July 31, 2007. During the six months ended January 31, 2008, there have been further conversions aggregating $3,520,000 principal amount, which discharged all of the secured convertible debentures outstanding, and $535,679 of accrued interest, representing all accrued and unpaid interest on such debentures. JAG Media issued a total of 10,139,199 shares in connection with such conversions.

The secured convertible debentures were amended, conditioned upon the effectiveness of JAG Media’s Merger with Cryptometrics, by letter agreements dated January 24, 2007, February 26, 2007, April 2, 2007, April 20, 2007, May 11, 2007, May 18, 2007, June 15, 2007, July 16, 2007, September 10, 2007 and November 7, 2007, all of which have terminated in accordance with their terms. JAG Media and YA Global entered into a new letter agreement on January 31, 2008 which provided for the conversion of the secured convertible debentures then outstanding and which increased the limit of its ownership of JAG Media from 4.99% as described above to 9.99%.

WARRANTS

In connection with the $2,250,000 new financing, JAG Media also issued to YA Global five warrants to purchase 12,000,000 shares of its common stock as follows: (i) Warrant No. CCP-1 exercisable for 2,000,000 shares at an exercise price of $0.40 per share; (ii) Warrant No. CCP-2 exercisable for 2,000,000 shares at an exercise price of $0.50 per share; (iii) Warrant No. CCP-3 exercisable for 2,000,000 shares at an exercise price of $0.60 per share; (iv) Warrant No. CCP-4 exercisable for 3,000,000 shares at an exercise price of $0.70 per share; and (v) Warrant No. CCP-5 exercisable for 3,000,000 shares at an exercise price of $0.80 per share. All five warrants expire in May 2011.

The exercise price and number of shares issuable pursuant to each of the warrants are also subject to adjustment in certain circumstances. In the event that JAG Media issues or sells any common stock, or is deemed to have issued or sold common stock through issuing stock options or convertible securities at or representing a price per share less than the exercise price of the warrants in effect immediately prior to such issuance or sale, then immediately after the issuance or sale, the exercise price of the warrants then in effect will be reduced to an amount equal to the price at which the common stock was, or was deemed to be, sold or issued. No such adjustment shall be made as a result of issuances of shares under its 1999 Long-Term Incentive Plan. Upon each adjustment to the exercise price of the warrants, the number of shares issuable upon exercise of the warrants will be adjusted to the number of shares determined by multiplying the exercise price in effect immediately prior to such adjustment by the number of shares of common stock issuable upon exercise of the warrants immediately prior to such adjustment and dividing the product by the exercise price resulting from such adjustment. The exercise price and the number of shares issuable pursuant to each of the warrants is also subject to adjustment in connection with certain corporate transactions.

YA Global exercised Warrant No. CCP-1 to the extent of 700,000 shares on January 31, 2008 at the exercise price of $0.40 per share resulting in proceeds to JAG Media of $280,000. The January 31, 2008 letter agreement referred to above amends the remaining outstanding warrants to purchase 11,300,000 shares of JAG Media’s common stock so that their respective first exercise dates will be 30 trading days following the Closing of the Merger, March 31, 2008, June 30, 2008, September 30, 2008 and December 31, 2008 and amends the exercise price of the warrants to be 88% of the average of the Volume Weighted Average Price of JAG Media’s common stock as quoted by Bloomberg during the 30 days immediately prior to the first date upon which each warrant may be exercised. Such amendments to the warrants will become ineffective on February 27, 2008 if the Closing of the Merger has not yet occurred by the close of business on that date, unless the parties agree to extend such date.

Unless it waives such restriction, which waiver would be subject to a 65-day notice period, YA Global may not exercise the warrants for an amount of shares of JAG Media’s common stock that would result in it owning in excess

of 9.99% of the then outstanding shares of such common stock. See “Risk Factors — Risks Related to its Capital Structure” for a description of the special risks posed by its issuance of the warrants.

ACQUISITION OF SOFTWARE DEVELOPMENT BUSINESS

On November 24, 2004, JAG Media entered into a Business Sale Agreement with TComm Limited, a company organized in the United Kingdom, and Pixaya (UK) Limited (formerly known as TComm (UK) Limited), a company organized in the United Kingdom and its wholly-owned subsidiary. Effective October 3, 2005, TComm (UK) Limited formally changed its name to Pixaya (UK) Limited. The transactions contemplated by the Business Sale Agreement were consummated on November 24, 2004. Under the Business Sale Agreement, Pixaya purchased TComm Limited’s software development business which is focused on streaming video solutions and all of its assets related to that business. The business acquired has not generated any significant revenue and is currently inactive.

The one product line JAG Media continued to develop is SurvayaCam (previously known as CCMTV), which consists of software programs (and related hardware) intended to enable field personnel to send real-time video streams from the field to a central point where they can be viewed and archived, as well as to other locations where they can be viewed. JAG Media has attempted to market SurvayaCam through demonstrations and pilot program deployments of the product, but has not been successful.

The purchase price paid to TComm Limited consisted of (i) 250,000 shares of JAG Media’s common stock, having a value based on the closing price of its common stock as of the close of business on the day prior to the acquisition, equal to approximately $42,500 and (ii) the payment of approximately $19,200 in cash. In addition, TComm Limited has agreed not to compete with the business conducted by Pixaya for a period of two years from the closing date of the transaction. The Business Sale Agreement also contains customary representations and warranties. TComm Limited has agreed to indemnify Pixaya for any damages which may result from a breach of its warranties but only if the damages exceed approximately $20,000. TComm Limited entered into a lockup agreement with JAG Media pursuant to which it agreed not to sell or otherwise transfer its shares of common stock for a period of one year.

In connection with entering into the Business Sale Agreement, Pixaya entered into employment agreements on November 24, 2004 with four individuals, all of whom were previously employed by the TComm Limited. The employment agreements had a term of three years and automatically renew unless terminated by either party. Such employees are no longer employed by Pixaya.

STOCK DIVIDEND

On March 18, 2003, JAG Media announced its intention to declare a special stock dividend. To effect such dividend, JAG Media filed a Certificate of Designation with the Secretary of State of the State of Nevada on April 11, 2003 which designated a new series of Class B common stock, par value $0.00001 per share, which was distributed by dividend to the stockholders of record as of the close of business on April 14, 2003 in the ratio of one share of Series 2 Class B common stock for every 100 shares of common stock. Such shares of Series 2 Class B common stock are non-voting, have dividend and liquidation rights equal to the common stock and are redeemable, which redemption by JAG Media is mandatory to the fullest extent permitted by law within six months following final resolution of any related successor lawsuit to its now dismissed action in Texas federal court against various brokerage firms at a redemption price which is the greater of (a) par value or (b) ninety percent of the net proceeds to us of such lawsuit after payment of fees and expenses incurred in connection with such lawsuit and all taxes on net income accrued or paid with respect to such net amount. Although the original lawsuit has been dismissed with prejudice, JAG Media is investigating a successor or other lawsuit relating to the subject matter thereof which would qualify for the mandatory redemption provisions for this class of securities. The shares of Series 2 Class B common stock do not have a CUSIP number.

JAG Media’s transfer agent has completed the issuance and mailing of Series 2 Class B common stock dividend certificates to all registered beneficial shareholders and to all beneficial owners who appear on beneficial owner lists supplied by brokers which are consistent with their share position with the Depository Trust Company. Series 2 Class B common stock dividend certificates have not yet been mailed to certain beneficial owners because

certain brokers have failed to submit a beneficial owner list to JAG Media’s transfer agent. The Merger will have no impact on the foregoing dividend payments.

RECAPITALIZATION

At the Annual Meeting on February 11, 2004, its stockholders approved, among other matters, a proposal to amend and restate Article Fourth of the Articles of Incorporation of JAG Media to:

(i) increase the aggregate authorized number of shares of all classes of stock from 200,000,000 to 300,440,000 of which (w) 250,000,000 shares shall be designated common stock, par value $0.00001 per share, (x) 400,000 shares shall be designated Series 2 Class B common stock, par value $0.00001 per share, (y) 40,000 shares shall be designated Series 3 Class B common stock, par value $0.00001 per share and (z) 50,000,000 shares shall be designated preferred stock, par value $0.00001 per share; and

(ii) reclassify each outstanding share of its existing Class A common stock and Series 1 Class B common stock into one share of common stock upon surrender of physical share certificates representing the existing Class A common stock and Series 1 Class B common stock for new common stock certificates.

The above-described recapitalization was effected on June 4, 2004 upon the filing of a Certificate of Amendment to JAG Media’s Articles of Incorporation with the Secretary of State of the State of Nevada. As a result of the recapitalization, the old shares of Class A common stock and Series 1 Class B common stock only represent the right to receive the applicable number of shares of the new common stock. The holder of such old shares will not have the right to vote or to receive any dividends or other distributions until such old shares have been exchanged for the new common stock.

BOOK ENTRY SHARES PERMITTED

Our Articles of Incorporation as amended on June 4, 2004 required that the new “certificate only” shares must bear the name of the beneficial owner on the face of each stock certificate. As required by SEC regulation Rule 17Ad-20 which was adopted November 30, 2004 and became effective March 7, 2005, this requirement was deleted by a further amendment of our Articles of Incorporation at our shareholders meeting on February 24, 2005. Accordingly, our shares of Common Stock can now trade in certificate form or in book entry form through the Depository Trust Company.

INCREASE IN AUTHORIZED SHARES

At the 2006 Annual Stockholders Meeting held on April 26, 2006, our stockholders voted to increase the authorized shares of our common stock from 250,000,000 to 500,000,000.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE OF JAG MEDIA

The following is certain information about JAG Media’s executive officers and directors.

Thomas J. Mazzarisi, age 50, is Chairman of the Board, Chief Executive Officer and General Counsel. Previously, Mr. Mazzarisi served as Executive Vice President and General Counsel from March 1999 to April 2, 2004 and as Chief Financial Officer from November 9, 2001 to April 2, 2004. Mr. Mazzarisi has been a member of the Board of Directors since July 1999. From 1997 until joining JAG Media Holdings, Inc., Mr. Mazzarisi practiced law from his own firm in New York, specializing in international commercial transactions. From 1988 until 1997, Mr. Mazzarisi was a Senior Associate at the former law firm of Coudert Brothers where he also specialized in international commercial transactions. Prior to joining Coudert Brothers, Mr. Mazzarisi was Deputy General Counsel of the New York Convention Center Development Corporation. Mr. Mazzarisi is a graduate of Fordham University where he received a B.A. in Political Economy and was elected to Phi Beta Kappa. Mr. Mazzarisi received his J.D. from Hofstra University School of Law.

Stephen J. Schoepfer, age 48 is President, Chief Operating Officer, Chief Financial Officer and Secretary. Previously, Mr. Schoepfer served as Executive Vice President, Chief Operating Officer and Secretary from July 1999 to April 2, 2004. Mr. Schoepfer has been a member of the Board of Directors since July 1999. Prior to joining

the Company in July 1999, he was a Financial Advisor with the investment firm of Legg Mason Wood Walker. Prior to joining Legg Mason, Mr. Schoepfer served as a Financial Advisor and Training Coordinator at Prudential Securities. Mr. Schoepfer attended Wagner College.

The Board of Directors of JAG Media is comprised of only two directors — Messrs. Mazzarisi and Schoepfer — neither of whom is independent. For that reason, JAG Media does not have a standing audit, nominating or compensation committee made up of independent directors. In light of JAG Media’s limited revenues and operations, the Board of Directors does not believe it would be cost effective to establish such committees. Transactions with related persons must be approved by the Board of Directors.

STOCK OWNERSHIP OF JAG MEDIA

The following table sets forth information regarding the beneficial ownership of JAG Media’s Common Stock as of January 31, 2008 (except as otherwise indicated) by (i) each person known by JAG Media to be the beneficial owner of more than 5% of its Common Stock, (ii) each director and nominee to be a director, (iii) each named executive officer and (iv) all directors and executive officers as a group. Except as otherwise indicated below, each of the persons named in the table has sole voting and investment power with respect to the shares set forth opposite such person’s name.


	Number of Shares
Name & Address of Beneficial Owner	Beneficiary Owned			Percentage of Class

YA Global Investments L.P.		5,877,970	(1) (2)		9.99	%
101 Hudson Street, Suite 3700
Jersey City, New Jersey 0732
Thomas Mazzarisi		610,000	(1) (3)		1.03	%
(Chairman of the Board
Chief Executive Officer and General Counsel)
6865 SW 18th Street, Suite B13,
Boca Raton, Florida 33433
Stephen Schoepfer		325,000	(1) (4)		*
(President, Chief Operating Officer,
Chief Financial Officer and Director)
6865 SW 18th Street, Suite B13,
Boca Raton, Florida 33433
All executive officers and directors as a group (2 persons)		935,000	(1) (3) (4)		1.57	%


*		Less than one percent


(1)		Based on 58,508,856 shares of Common Stock issued and outstanding as of January 31, 2008 (excluding shares of prior classes exchangeable for shares of Common Stock pursuant to its recapitalizations, plus the number of shares of Common Stock which the beneficial owner has the right to acquire within 60 days, if any).


(2)		The beneficial owner owns warrants to purchase 11,300,000 shares of Common Stock, but by contract the warrants cannot be exercised if after exercise the beneficial owner would own more than 9.99% of the outstanding shares of Common Stock. Accordingly only 329,800 shares subject to such warrants are included.


(3)		Includes 500,000 shares of Common Stock issuable upon the exercise of stock options.


(4)		Includes 250,000 shares of Common Stock issuable upon the exercise of stock options.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS OF JAG MEDIA

There have been no transactions between JAG Media and either of Messrs. Mazzarisi or Schoepfer with a value in excess of $120,000 for the last three fiscal years, except for the renewal of their employment agreements for a one year additional term.

MARKET FOR JAG MEDIA COMMON STOCK
AND RELATED MATTERS

PRICE RANGE OF COMMON STOCK

On April 8, 2002, JAG Media effected a recapitalization of its then outstanding common stock pursuant to which each one and one-tenth (1.1) shares of its outstanding common stock was reclassified into one (1) share of Class A Common Stock and one-tenth (1/10th) of a share of Series 1 Class B Common Stock. A public trading market for such Series 1 Class B Common Stock never developed.

On June 4, 2004, JAG Media effected a second recapitalization pursuant to which each share of its outstanding Class A Common Stock and Series 1 Class B Common Stock was reclassified into one (1) share of new JAG Media Common Stock.

For the period covered below, JAG Media’s Common Stock traded in the over-the-counter market on the Bulletin Board or on the Pink Sheets under the symbol “JAGH.” The following table based on Bloomberg L.P. reflects quarterly high and low bid prices of its Class A Common Stock and JAG Media Common Stock from August 1, 2004 through January 31, 2008. Such prices are inter-dealer quotations without retail mark-ups, mark-downs or commissions, and may not represent actual transactions.


	High		Low

Fiscal Year 2005
First Quarter, ending October 31, 2004		1.10		0.15
Second Quarter, ending January 31, 2005		0.65		0.15
Third Quarter, ending April 30, 2005		0.52		0.11
Fourth Quarter, ending July 31, 2005		0.30		0.001
Fiscal Year 2006
First Quarter, ending October 31, 2005		0.30		0.02
Second Quarter, ending January 31, 2006		0.46		0.14
Third Quarter, ending April 30, 2006		0.41		0.19
Fourth Quarter, ending July 31, 2006		0.33		0.20
Fiscal Year 2007
First Quarter, ending October 31, 2006		0.30		0.05
Second Quarter, ending January 31, 2007		0.45		0.12
Third Quarter, ending April 30, 2007		0.60		0.30
Fourth Quarter, ending July 31, 2007		1.45		0.44
Fiscal Year 2008
First Quarter, ending October 31, 2007		1.12		0.32
Second Quarter ending January 31, 2008		1.12		0.62

JAG Media issued shares of its Series 2 Class B Common Stock to holders of record as of April 14, 2003 of its then Class A Common Stock. JAG Media issued shares of its Series 3 Class B Common Stock to an investor in June 2003 and to an investor in September 2003. A public trading market for the Series 2 Class B Common Stock and the Series 3 Class B Common Stock never developed.

The high and low bid prices of JAG Media Common Stock on January 31, 2008 were $0.91 and $0.85, respectively, as reported by Bloomberg L.P. On January 31, 2008, the closing bid price for our Common Stock was $0.88 as reported by Bloomberg L.P. As of January 31, 2008, there were approximately 1,306 stockholders of record of JAG Media Common Stock, excluding 1,373 holders of shares of prior classes of common stock which can be converted into our current Common Stock upon presentation in accordance with the terms of our recapitalization in 2002 and 2004 described above.

JAG Media has never paid any cash dividends on JAG Media Common Stock and anticipates that for the foreseeable future, no cash dividends will be paid on JAG Media Common Stock whether or not the Merger is

consummated. Payment of future cash dividends will be determined by the Board of Directors of JAG Media upon conditions then existing, including JAG Media’s financial condition, capital requirements, cash flow, profitability, business outlook and other factors. In addition, JAG Media’s future credit arrangements may restrict the payment of dividends. The Cryptometrics Common Stock is not traded on any recognized securities market.

JAG MEDIA COMPENSATION DISCUSSION AND ANALYSIS

The elements of compensation paid to our executive officers consists of annual salary provided for under employment agreements and options granted under our 1999 Long Term Incentive Plan. In addition, the employment agreements with our executive officers provide for severance payments and the grant of options upon a change of control. We do not have an independent compensation committee of the Board of Directors.

No compensation other than annual salaries of $150,000 was paid to the executive officers with respect to the fiscal year ended July 31, 2007. The Board of Directors believed that the base salary, outstanding options, and potential severance and change of control payments were sufficient compensation to retain our executive officers and provide meaningful incentives to effect our strategy and to pursue and complete acquisitions. This conclusion was not based upon the directors’ evaluation of their own performance as executive officers. The directors did consider our cash position and the fact that given our outstanding commitments for additional issuances of JAG Media Common Stock, including those under the Merger Agreement and other commitments, it would be inappropriate to make additional cash or equity awards to themselves as executive officers. We did not reprice any stock options held by our executive officers during our fiscal year ended July 31, 2007. We do not maintain a deferred compensation plan. Nor do we provide pension benefits.

1999 Long-Term Incentive Plan

In October, 1999 the Board of Directors approved the 1999 Long-Term Incentive Plan. This plan was most recently amended in April 2002. The purpose of the plan is to allow JAG Media to attract and retain officers, employees, directors, consultants and certain other individuals and to compensate them in a way that provides additional incentives and enables such individuals to increase their ownership interests in JAG Media. Individual awards under the plan may take the form of:


	•	either incentive stock options or non-qualified stock options;

	•	stock appreciation rights;

	•	restricted or deferred stock;

	•	dividend equivalents;

	•	bonus shares and awards in lieu of JAG Media’s obligations to pay cash compensation; and

	•	other awards, the value of which is based in whole or in part upon the value of the Common Stock.

The plan will generally be administered by a committee appointed by the board of directors, except that the board will itself perform the committee’s functions under the plan for purposes of grants of awards to directors who serve on the committee. The board may also perform any other function of the committee and is currently serving as the committee. The committee generally is empowered to select the individuals who will receive awards and the terms and conditions of those awards, including exercise prices for options and other exercisable awards, vesting and forfeiture conditions, performance conditions, the extent to which awards may be transferable and periods during which awards will remain outstanding. Awards may be settled in cash, shares, other awards or other property, as the committee may determine.

The maximum number of shares that may be subject to outstanding awards under the plan will not exceed 6,000,000 shares of Common Stock. As of January 31, 2008, there were a total of 750,000 shares of Common Stock subject to outstanding options granted under the plan. These options are exercisable at $0.02 per share.

The plan will remain in effect until terminated by the board of directors. The plan may be amended by the board of directors without the consent of JAG Media’s stockholders, except that any amendment, although effective

when made, will be subject to stockholder approval if required by any Federal or state law or regulation or by the rules of any stock exchange or automated quotation system on which JAG Media’s Common Stock may then be listed or quoted. The number of shares reserved or deliverable under the plan, the annual per-participant limits, the number of shares subject to options automatically granted to non-employee directors, and the number of shares subject to outstanding awards are subject to adjustment in the event of stock splits, stock dividends and other extraordinary corporate events. JAG Media generally will be entitled to a tax deduction equal to the amount of compensation realized by a participant through awards under the plan, except no deduction is permitted in connection with incentive stock options if the participant holds the shares acquired upon exercise for the required holding periods; and deductions for some awards could be limited under the $1.0 million deductibility cap of Section 162(m) of the Internal Revenue Code. This limitation, however, should not apply to certain options, stock appreciation rights and performance-based awards granted thereafter if JAG Media complies with certain requirements under Section 162(m).

Mazzarisi and Schoepfer Employment Agreements

On August 31, 2001, JAG Media entered into amended and restated three-year employment agreements with each of Stephen J. Schoepfer (JAG Media’s President, Chief Operating Officer, Chief Financial Officer and Secretary) and Thomas J. Mazzarisi (JAG Media’s Chairman of the Board, Chief Executive Officer and General Counsel). On November 3, 2005, certain of the provisions of the amended and restated employment agreements were amended. Each of these employment agreements now expires on August 31, 2008 and provides for an annual base salary of $150,000.

The executives are to be granted an option to purchase a 5% ownership interest in any subsidiary that JAG Media successfully creates and spins off during the term of their employment contracts.

Pursuant to these employment agreements, each of the above named executives is entitled to the same medical and other benefits, including health and life insurance coverage, as are provided to other employees of JAG Media. In the event JAG Media terminates the employment of any of such executives without cause or such executive resigns for good reason as defined in the employment agreements, such executive shall be entitled to receive (i) continued medical and life insurance coverage for a period equal to the greater of one year or the number of years and fractions thereof between the date of such termination and the end of the term (the Severance Period), (ii) a lump sum cash payment equal to the executive’s highest rate of annual salary in effect during the term multiplied by the Severance Period, (iii) a lump sum cash payment equal to the number of accrued and unused vacation days calculated at the executive’s then current salary rate and (iv) accelerated vesting of all of the executive’s outstanding stock options. Such cash payments will be made within 10 days of termination of employment, and shall not be subject to offset for amounts earned by the executive in respect of any subsequent employment, nor is the executive required to seek any such subsequent employment.

Further, immediately prior to a “change in control” (as defined in JAG Media’s Long-Term Incentive Plan) of JAG Media, the above-named executives shall also be granted an option to acquire 1,000,000 shares of JAG Media’s Common Stock (subject to equitable adjustments for stock splits, etc.) at an exercise price equal to the fair market value of the average closing bid price of the Company’s stock for the 30 days prior to such change in control, which option shall be fully vested and immediately exercisable in full and expire on a date which is the earlier of ten years from such change in control and three years after termination of employment. The Merger constitutes a change of control for purposes of Messrs. Mazzarisi’s and Schoepfer’s employment agreements. Generally, under JAG Media’s Long-Term Incentive Plan a “change in control” shall be deemed to have occurred (i) if there is an acquisition of 30% or more of JAG Media’s then outstanding shares of Common Stock, (ii) Messrs. Mazzarisi and Schoepfer cease for any reason to constitute at least a majority of the members of JAG Media’s Board, or (iii) a merger, consolidation, recapitalization, reorganization, sale or disposition of all or a substantial portion of JAG Media’s assets, or similar transaction shall have occurred. However, a change in control shall not be deemed to have occurred if consummation of such a transaction would result in at least 70% of the total voting power represented by the voting securities of JAG Media outstanding immediately after such transaction being beneficially owned by at least 75% of the holders of outstanding voting securities of JAG Media immediately prior to the transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction.

In lieu of options previously granted which were cancelled, JAG Media granted on August 31, 2001 to each of Messrs. Mazzarisi and Schoepfer options to purchase an aggregate of 1,000,000 shares of JAG Media’s Common Stock exercisable at a price per share of $0.02, all of which vested immediately upon the execution of the amended and restated agreements. These options, which have been partially exercised, are subject to the terms of JAG Media’s 1999 Long-Term Incentive Plan, as amended, and may be exercised, in whole or in part, by the executives on a cashless basis.

Promptly after the Effective Time, JAG Media will amend the employment agreements of Messrs. Mazzarisi and Schoepfer to, among other things, cancel all previous options granted to each of Messrs. Mazzarisi and Schoepfer and to reduce the number of options granted to each of Messrs. Mazzarisi and Schoepfer upon a change in control from 1,000,000 to 750,000, which options shall be exercisable immediately on a cashless basis, with one half of such shares being subject to a lock up period of one year from the date of the closing of the Merger. JAG Media will assign the employment agreements to its subsidiary, Pixaya LLC and Messrs. Mazzarisi and Schoepfer will release JAG Media from all liability thereunder (including salary payments) except that JAG Media will remain contractually obligated to carry out its obligations to fulfill any exercise of options remaining under the employment agreements granted in connection with the change in control. Pixaya LLC will then terminate the employment of Messrs. Mazzarisi and Schoepfer under the employment agreements without cause.

ANNUAL COMPENSATION

The following table sets forth certain summary information regarding compensation paid to JAG Media’s Chief Executive Officer and President for services rendered during the fiscal years ended July 31, 2005, 2006 and 2007. Except as listed in the table below, no executive officer holding office in fiscal year 2007 received total annual salary and bonus exceeding $100,000. No such officers have been awarded any stock options, stock appreciation rights or other long term or incentive compensation not reflected below.

Summary Compensation Table


							All other
Name and Principal Position	Fiscal Year		Salary		Bonus		Compensation		Total

Thomas J. Mazzarisi,		2007	$	150,000		—		—	$	150,000
Chairman of the Board, Chief		2006	$	150,000		—		—	$	150,000
Executive Officer and General Counsel		2005	$	150,000		—		—	$	150,000
Stephen J. Schoepfer,		2007	$	150,000		—		—	$	150,000
President, Chief Operating Officer,		2006	$	150,000		—		—	$	150,000
Chief Financial Officer and Secretary		2005	$	150,000		—		—	$	150,000

Director Compensation

JAG Media currently does not compensate its directors, who are Messrs. Mazzarisi and Schoepfer, for their services in such capacity.

Option Grants and Exercises in Fiscal Year 2007

No options, freestanding SARs or restricted stock awards were granted to, or exercised by, any of JAG Media’s named executive officers during the fiscal year ended July 31, 2007.

OUTSTANDING EQUITY AWARDS AT JULY 31, 2007

The following table sets forth information regarding options to acquire shares of JAG Media’s Common Stock outstanding under its Long-Term Incentive Plan held by Thomas J. Mazzarisi (JAG Media’s Chairman, Chief

Executive Officer and General Counsel) and Stephen J. Schoepfer (JAG Media’s President, Chief Operating Officer, Chief Financial Officer and Secretary) as of July 31, 2007.

Number of

Securities

Option

Underlying

Exercise

Unexercised

or Base

Option

Options

Price per

Expiration

Name

Exercisable

Unexercisable

($/Share)

Date

Thomas J. Mazzarisi

500,000

0.02

August 31, 2011

Stephen J. Schoepfer

250,000

0.02

August 31, 2011


*		Not Applicable

EQUITY COMPENSATION PLAN INFORMATION AS OF JULY 31, 2007

Number of Securities

Remaining Available

to be Issued

Weighted Average

for Future Issuance

Upon Exercise of

Exercise Price of

Under Equity Compensation

Outstanding Options,

Plans (Excluding Securities

Warrants and Rights(a)

Warrants and Rights(b)

Reflected in Column(a))(c)

Equity compensation plans approved by security holders

Not applicable

1999 Long-Term Incentive Plan (not approved by security holders)

1,000,000

.02

5,000,000

Individual Compensation Arrangements (not approved by security holders)

Not applicable

Not Applicable

TOTAL

1,000,000

(2)

5,000,000

(1)


(1)		The maximum number of shares that may be subject to outstanding awards under JAG Media’s 1999 Long-Term Incentive Plan is 6,000,000 shares of Common Stock. Because this limitation applies only to outstanding awards under the plan, as the outstanding options included in column (a) are either exercised, forfeited or expire pursuant to their terms, the number of shares remaining available for future issuance in column (c) shall be increased by the number of shares subject to such option so exercised, forfeited or expired.

(2)		See Note 6 to Financial Statements.

Its 1999 Long-Term Incentive Plan provides JAG Media’s directors, officers, employees and consultants with the opportunity to participate in its ownership. JAG Media’s Board of Directors administers the plan, addressing participation, the awards offered and any applicable conditions of exercise. In making these determinations, JAG Media’s Board of Directors will generally consider the participant’s position and record of service to it. The Board of Directors may issue options, stock appreciation rights, restricted stock, deferred stock, bonus stock, awards in lieu of cash obligations, dividend equivalents and other stock based awards, all subject to terms and conditions to be set by the Board of Directors. The plan also contains standard provisions dealing with matters such as adjustment of the number of shares subject to options and covered by the plan in addition to amendment and termination of the plan.

INDEMNIFICATION OF OFFICERS AND DIRECTORS

JAG Media’s Articles of Incorporation provide that JAG Media shall indemnify JAG Media’s officers, directors, employees and agents to the full extent permitted by Nevada law. JAG Media’s Bylaws include provisions to indemnify JAG Media’s officers and directors and other persons against expenses (including judgments, fines and amounts paid for settlement) incurred in connection with actions or proceedings brought against them by reason of their serving or having served as officers, directors or in other capacities. JAG Media does not, however, indemnify them in actions in which it is determined that they have not acted in good faith or have acted unlawfully or not in JAG Media’s best interest. In the case of an action brought by or in the right of JAG Media, JAG Media shall

indemnify them only to the extent of expenses actually and reasonably incurred by them in connection with the defense or settlement of these actions and JAG Media shall not indemnify them in connection with any matter as to which they have been found to be liable to JAG Media, unless the deciding court determines that, notwithstanding such liability, that person is fairly entitled to indemnity in light of all the relevant circumstances.

JAG Media does not currently maintain director’s and officer’s liability insurance but it may do so in the future.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to JAG Media’s directors and officers pursuant to the foregoing provisions, or otherwise, JAG Media 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 and is, therefore, unenforceable.

FACILITIES

LEGAL PROCEEDINGS

MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS OF

JAG MEDIA FOR THE FISCAL YEARS ENDED JULY 31, 2007, 2006 AND 2005

AND THE THREE MONTHS ENDED OCTOBER 31, 2007 AND 2006.

The following discussion should be read in conjunction with the consolidated financial statements and the notes to those statements that appear elsewhere in this Consent Solicitation/Prospectus. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this Consent Solicitation/Prospectus particularly in “Risk Factors.” “We” and “our” as used in this Management Discussion and Analysis section refers to JAG Media.

Critical Accounting Policies and Estimates

Our discussion and analysis of our 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 for financial statements filed with the Securities and Exchange Commission. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to accounts receivable, equipment, stock-based compensation, income taxes, derivative liability and contingencies. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

As required, effective August 1, 2006, we adopted Statement of Financial Accounting Standards No. 123 (Revised 2004), “Share-Based Payment” (“SFAS 123(R)”) using the modified prospective application transition method. Because the fair value recognition and the amortization provisions of SFAS No. 123 and SFAS No. 123(R) are materially consistent, the adoption of SFAS No. 123(R) did not have a significant impact on the methods we used to value and account for our options or our financial position and results of operations and, accordingly, charges to compensation cost for the fair value of the options continue to be amortized to expense over the vesting period. In accordance with SFAS No. 123(R), we reclassified previously unamortized unearned compensation of $34,870 from unearned compensation to additional paid-in capital as of the date of adoption. There was no charge to operations. Through July 31, 2006, we recognized the cost of grants of options to employees and non-employees based on the fair value of the equity instruments at the date issued amortized over the periods in which the related services were rendered in accordance with the provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”). Accordingly, we had been estimating the fair value of stock options using an option-pricing model (generally, the Black-Scholes model) that meets the criteria set forth in SFAS 123 and common stock using its market value. We have been recording such value through charges to compensation cost and corresponding credits to equity. The charges to compensation cost are being amortized to expense over the vesting period.

We review the terms of convertible debt and equity instruments we issue to determine whether there are embedded derivative instruments, including embedded conversion options, that are required to be bifurcated and accounted for separately as derivative financial instruments. In connection with the sale of convertible debt and equity instruments, we may issue freestanding warrants and options that may, depending on their terms, be accounted for as derivative instrument liabilities, rather than as equity.

Bifurcated embedded derivatives and freestanding warrants and options accounted for as derivative instrument liabilities are initially recorded at fair value and are then revalued at each reporting date with changes in the fair value reported as charges or credits to income. When the convertible debt or equity instruments contain embedded derivative instruments that are to be bifurcated and accounted for as liabilities, the total proceeds allocated to the convertible host instruments are first allocated to the fair value of all the bifurcated derivative instruments to be accounted for as derivative liabilities. The remaining proceeds, if any, are then allocated to the convertible

instruments themselves. This usually results in those convertible instruments being recorded at a discount from their face amount to reflect beneficial conversion prices that are, effectively, below market value.

The discount from the face value of the convertible debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to income, using the effective interest method. Since the conversion of the secured convertible debentures issued by us during the year ended July 31, 2006 could have been at a discount from the market price and, accordingly, could have resulted in the issuance of an indeterminable number of common shares, we determined that we would be prohibited from concluding that it would have a sufficient number of authorized and unissued shares to net -share settle any of those warrants or any other warrants or options previously issued or granted to non-employees. Therefore, as of the date the secured convertible debentures and the related warrants were issued, we recorded the related fair value of all warrants issued with the debentures and options previously issued to non-employees as a liability. Accordingly, subsequent changes in the fair value of such options and warrants at the end of each reporting period have been and will be recorded as charges or credits to our results of operations.

Due to uncertainties related to, among other things, the extent and timing of future taxable income, we have recorded a full valuation allowance to reduce our deferred tax assets. A positive adjustment to income will be required in future years if we determine that we could realize these deferred tax assets.

Related Party Transactions:

There were no related party transactions within our last three fiscal years ended July 31 or our last fiscal quarters ended October 31 required to be reported.

Off-Balance Sheet Arrangements:

We are not party to any off-balance sheet arrangements at July 31, 2007 or 2006 or at October 31, 2007 or 2006.

Results of Operations for Years ended July 31, 2007, 2006 and 2005:


	Year Ended July 31,
	2007			2006			2005

Revenues	$	203,286		$	166,692		$	239,651

Operating expenses:
Cost of revenues		73,047			85,585			152,371
Selling expenses		97,029			46,637			43,441
General and administrative expenses		1,754,085			2,381,789			1,745,455

Totals		1,924,161			2,514,011			1,941,267

Loss from operations		(1,720,875	)		(2,347,319	)		(1,701,616	)
Other income (expense):
(Loss) gain on change in value of derivative liability		(8,524,813	)		1,094,246			—
Loss on extinguishment of promissory notes		—			(77,373	)		—
Writeoff of goodwill		—			—			(50,400	)
Interest income		54			2,573			8,357
Finance charge for derivative liability in excess of proceeds from convertible debentures		—			(1,795,005	)		—
Interest expense		(1,529,518	)		(513,978	)		(145,506	)

Net loss	$	(11,775,152	)	$	(3,636,856	)	$	(1,889,165	)

Revenues:

Revenues consist of sales of the streaming video products and subscription revenues from annual, semi-annual, quarterly and monthly subscriptions relating to our product “JAGNotes.” JAGNotes is a daily consolidated investment report that summarizes newly issued research, analyst opinions, upgrades, downgrades, and analyst coverage changes from various investment banks and brokerage houses. Revenues increased modestly for the year ended July 31, 2007 versus the year ended July 31, 2006 due to the sales of our streaming video products. Revenues from streaming video products were approximately $26,000 for the year ended July 31, 2007 versus none for the year ended July 31, 2006. The sale of the streaming video product was promotional in nature and designed to create a distribution channel and create interest in the product. Revenues from subscriptions were approximately $177,000 for the year ended July 31, 2007 versus approximately $167,000 for the year ended July 31, 2006.

Revenues from subscriptions have decreased since the year ended July 31, 2005 due primarily to the lack of advertising and increased competition

Cost of revenues:

Cost of revenues includes the cost to transmit the product over the telephone and fax lines, on-line service charges for our web site, costs in connection with the development and maintenance of the web site, and payments to commentators and employees for their reports that are posted on our web site.

During the year ended July 31, 2007, consulting fees were approximately $31,000 as compared to approximately $61,000 for the year ended July 31, 2006 and $113,300 for the year ended July 31, 2005. Such fees included non-cash charges associated with the amortization of unearned compensation arising from the issuance of shares in exchange for services of approximately $13,000, $12,000 and $35,000 for the years ended July 31, 2007, 2006 and 2005, respectively. The decrease in consulting fees is a result of the expiration of consulting contracts associated with commentators for our jagnotes.com website. Costs associated with the transmission of our product over telephone and fax lines and costs associated with the maintenance of our web site have decreased. Costs of streaming video products sold were approximately $24,000 for the year ended July 31, 2007. There were no costs of streaming video products sold during the years ended July 31, 2006 or 2005.

Net losses:

The net loss during the year ended July 31, 2007 includes a loss on the change in value of derivative liability of approximately $8,525,000 which arises from the issuance of warrants for the purchase of common stock , although we may not be able to net settle the exercise of warrants for stock. The loss arises from the increase in our stock price as of July 31, 2007 over our stock price as of July 31, 2006.

The net loss during the year ended July 31, 2006 includes a gain on the change in value of derivative liability of approximately $1,094,000 which arises from the issuance of warrants for the purchase of common stock, although we may not be able to net settle the exercise of warrants for stock. The loss arises from the decrease in our stock price as of July 31, 2006 from our stock price as of May 24, 2006, the date on which the warrants were issued.

Selling expenses:

Selling expenses consist primarily of advertising and other promotional expenses. The increase results primarily from new sales and marketing expenses of Pixaya, our United Kingdom subsidiary. Such fees included $24,000 of non-cash amortization of options issued to a consultant for 200,000 shares of common stock with a fair market value of $36,000 in exchange for services during the year ended July 31, 2007. There were no such fees during the years ended July 31, 2006 and 2005.

General and administrative expenses:

General and administrative expenses consist primarily of compensation and benefits for the officers, other compensation, which, for the year ended July 31, 2007 includes non cash charges for the issuance of 180,000 shares of our common stock with an aggregate fair value of $62,200 to certain employees, occupancy costs, professional fees and other office expenses. General and administrative expenses during the year ended July 31, 2006 include a

100

legal settlement of $250,000 and a decrease in legal and accounting costs associated with a proposed acquisition during the year ended July 31, 2007 versus the year ended July 31, 2006.

We have entered into a merger agreement with, among others, Cryptometrics, Inc. pursuant to which Cryptometrics would merge with a newly created subsidiary of ours. During the year ended July 31, 2007, pursuant to the terms of the Merger Agreement, Cryptometrics has paid various legal and accounting costs, totaling approximately $580,000 on our behalf, of which approximately $543,000 are related to the merger agreement and approximately $37,000 are related to our operations, that we will not have to be repay to Cryptometrics in the event that the merger is not successfully completed. The costs paid by Cryptomertrics have been charged to general and administrative expenses and the amounts we received have been recorded as a capital contribution and included in additional paid-in capital.


*(Loss)*	*gain on change in value of derivative liability:*

The loss on derivative liability for the year ended July 31, 2007 reflects the effect of the increase in the fair market value of our common stock and the resulting increase as of July 31, 2007 in the fair value of outstanding warrants issued in excess of debt proceeds. As of July 31, 2007, the fair market value of the warrants was approximately $11,059,000 while as of July 31, 2006, the fair market value of those warrants was approximately $2,744,000, resulting in a loss of approximately $8,315,000 for the year ended July 31, 2007. As of July 31, 2007 there were no outstanding options issued to non-employees. At July 31, 2006 the fair market value of non-employee options then outstanding was approximately $46,000. On October 2, 2006, the fair market value of additional options then issued to a non-employee was approximately $36,000. On February 21, 2007, a consultant exercised options to purchase 200,000 shares of common stock at $0.02 per share and on June 11, 2007 a consultant exercised options to purchase 200,000 shares of common stock at $0.05 per share resulting in the reclassification of $292,000 from the derivative liability relating to these options to equity for the year ended July 31, 2007.

The gain on derivative liability for the year ended July 31, 2006 reflects the effect of the decrease in the fair market value of our common stock and the resulting decrease as of July 31, 2006 in the excess of the fair value of the value of the warrants issued in excess of debt proceeds and options issued to non-employees as compensation. As of July 31, 2006, the fair market value of those warrants was approximately $2,744,000. The fair market value of options issued to non-employees on July 31, 2006 was approximately $46,000 while at May 25, 2006 the fair market value of these options when issued was approximately $64,000.

Loss on extinguishment of promissory note:

On May 25, 2006, when we terminated our Equity Line with YA Global Investments, L.P. (“YA Global”) (formerly known as Cornell Capital Partners, L.P.), we also converted $250,000 of the principal of our $2,000,000 promissory note payable to YA Global into 1,250,000 shares of our common stock which were issued on such date, and converted the remaining principal amount of $1,750,000 and accrued interest of $150,000 on the promissory note into a secured convertible debenture in the principal amount of $1,900,000. At the date of conversion there was $31,674 of unamortized discount remaining from the issuance of the $2,000,000 promissory note and upon conversion, the common stock issued had a fair market value of $400,000 in settlement of the $250,000 principal and additional unpaid interest of $104,301, we therefore incurred a loss on extinguishment of debt of $77,373.

Finance charge for derivative liability in excess of proceeds from convertible debentures:

In connection with our sale of convertible debentures, on May 25, 2006, we issued warrants to purchase 12,000,000 shares of our common stock at prices ranging from $0.40 to $0.80 expiring in May 2011 with a fair market value of $3,820,005 based on the Black-Scholes options pricing model assuming a risk free interest rate of 6% annually, no dividend payments, annual volatility of 335.722%, exercise prices ranging from $0.40 to $0.80, and the stock price of $0.32 when issued in connection with convertible debt proceeds of $2,025,000 as further discussed below. The finance charge for derivative liability of $1,795,000 represents the excess of the fair market value of the warrants over the debt proceeds.

101

Interest expense:

Interest expense increased approximately $1,016,000 for the year ended July 31, 2007 over the year ended July 31, 2006 due to the increased borrowings under our secured convertible debentures payable to YA Global which were outstanding for only two months of fiscal 2006.

During the year ended July 31, 2007 interest totaling approximately $1,530,000 is comprised primarily of interest on our secured convertible debentures and interest from amortization of debt discount. Interest of approximately $366,000 was incurred as interest charged at 10% per annum on our convertible debentures.

During the year ended July 31, 2007 interest expense of approximately $1,135,000 was incurred from the amortization of debt discount related to the $2,250,000 convertible debentures issued May 25, 2006 and May 31, 2006.

During the year ended July 31, 2006 interest totaling approximately $514,000 is comprised of interest on our promissory note and secured convertible debentures, interest from amortization of debt discount, and interest incurred upon conversion of our promissory note to shares of common stock.

During the year ended July 31, 2006 interest on the note and the debentures of approximately $271,000 was incurred as approximately $196,000 of interest charged at 12% per annum on the $2,000,000 promissory note payable to YA Global for the period from August 1, 2005 through May 25, 2006 when we converted our note as described above and approximately $75,000 of interest charged at 10% per annum on the $1,900,000 convertible debenture issued May 25, 2006 as described above, and new convertible debentures totaling $2,250,000 issued May 25, 2006 and May 31, 2006 as described below.

During the year ended July 31, 2006 interest arising from the amortization of debt discount of approximately $168,000 is composed of approximately $41,000 of previously unamortized debt discount remaining from costs incurred in obtaining the $2,000,000 financing from YA Global under our promissory note and approximately $127,000 to amortize debt discount related to the new convertible debentures totaling $2,250,000.

Interest expense increased approximately $368,000 for the year ended July 31, 2006 over the year ended July 31, 2005 due principally to our $2,000,000 promissory note being outstanding for only about six months of fiscal 2005. Dring the year ended July 31, 2005 interest totaling approximately $145,500 is comprised of approximately $118,400 of interest charged at 12% per annum on the $2,000,000 promissory note from YA Global for the six month period the debt was in place and approximately $27,100 of amortization of debt discount related to costs incurred and deducted from the promissory note.

Three months ended October 31, 2007 as compared to three months ended October 31, 2006


	Three Months Ended
	October 31,
	2007			2006			$ Change
				(restated)

Revenues	$	36,732		$	43,331		$	(6,599	)

Operating expenses:
Cost of revenues		4,621			24,650			(20,029	)
Selling expenses		7,296			24,262			(16,966	)
General and administrative expenses		437,227			266,850			170,377

Totals		449,144			315,762			133,382

Loss from operations		(412,412	)		(272,431	)		(139,981	)
Other income (expense) :
Gain on change in value of derivative liability		1,933,938			492,951			1,440,987
Interest income		—			77			(77	)
Interest expense		(189,847	)		(468,249	)		278,402

Net income (loss)	$	1,331,679		$	(247,652	)	$	1,579,331

102

Revenues:

Revenues consist of subscription revenues from annual, semi-annual, quarterly and monthly subscriptions relating to our product “JAGNotes.” JAGNotes is a daily consolidated investment report that summarizes newly issued research, analyst opinions, upgrades, downgrades, and analyst coverage changes from various investment banks and brokerage houses. Revenues decreased for the three months ended October 31, 2007 versus the three months ended October 31, 2006 due to the lack of advertising and increased competition.

Cost of revenues:

Cost of revenues includes the cost to transmit the product over the telephone and fax lines, on-line service charges for our web site, and costs in connection with the development and maintenance of the web site.

During the three months ended October 31, 2007, there were no consulting fees as compared to approximately $12,350 for the three months ended October 31, 2006. Such fees included non-cash charges associated with the amortization of unearned compensation arising from the issuance of shares in exchange for services of approximately $3,250 for the three months ended October 31, 2006. The decrease in consulting fees is a result of the expiration of consulting contracts associated with commentators for our jagnotes.com website. In addition, costs associated with the transmission of our product over telephone and fax line and costs associated with the maintenance of our web site declined.

Selling expenses:

Selling expenses consist primarily of advertising and other promotional expenses. The decrease results primarily from suspension of new sales and marketing expenses of Pixaya, our United Kingdom subsidiary. Such fees included $2,400 of non-cash amortization of options issued to a consultant for 200,000 shares of common stock with a fair market value of $36,000 in exchange for services during the three months ended October 31, 2006.

General and administrative expenses:

General and administrative expenses consist primarily of compensation and benefits for the officers, other compensation, which includes non cash charges for the issuance of 40,000 shares of our common stock with an aggregate fair value of $25,600 to certain employees, occupancy costs, professional fees and other office expenses. The increase in general and administrative expenses is attributable to an accrual for payroll taxes of approximately $45,000, and an increase in legal and accounting costs associated with a proposed acquisition during the three months ended October 31, 2007 versus the three months ended October 31, 2006.

Gain on change in value of derivative liability:

The gain on derivative liability reflects the effect of the decrease in the fair market value of our common stock. As of October 31, 2007, the fair market value of the warrants was approximately $9,069,000 while as of July 31, 2007, the fair market value of those warrants was approximately $11,059,000, resulting in a gain of approximately $1,989,000 for the three months ended October 31, 2007. There were no options issued to non-employees at October 31, 2007 or July 31, 2007. The fair market value of options issued to non-employees at October 31, 2006 was approximately $82,000 while at July 31, 2006 the fair market value of options then outstanding was approximately $46,000 and at October 2, 2006, the fair market value of options issued to a non-employee was approximately $36,000, resulting in a gain of approximately $2,000 for the three months ended October 31, 2006.

Interest expense:

The decrease in interest expense of approximately $278,000 arises from a decrease in borrowings under our promissory note and secured convertible debentures payable to YA Global and conversions of principal balances of our convertible debentures into shares of our common stock.

103

Acquisition of Software Development Business:

On November 24, 2004, we and Pixaya (UK), our newly organized subsidiary, entered into a Business Sale Agreement with TComm Limited, a company organized in the United Kingdom. We entered into the transaction to access the seller’s development stage software, which we believed offered a new platform for delivery of our services as well as being valuable in its own right.

The transactions contemplated by the Business Sale Agreement were consummated on November 24, 2004. Under the Business Sale Agreement, Pixaya purchased the seller’s software development business, which is focused on streaming video solutions, and all of its assets related to that business. The business acquired had not generated any significant revenue as of the date of the acquisition or through October 31, 2007.

The acquired product lines we originally intended to continue to develop included: (1) Pixaya Mobile (previously known as TComm TV), which was intended to deliver on-demand video/audio clips to various java-based and Symbian-based mobile phones and (2) SurvayaCam (previously known as CCMTV), which is currently under development and will consist of software programs (and related hardware) intended to enable field personnel to send real-time video streams from the field to a central point where they can be viewed by one or more persons. During the year ended July 31, 2006, we discontinued development of Pixaya Mobile. We are unable to estimate the amount of resources that will be required to complete the development of the SurvayaCam product line. Due to lack of financing, Pixaya (UK) is currently inactive.

The purchase price paid to TComm Limited consisted of (i) 250,000 shares of our common stock, having a value based on the closing price of our common stock as of the close of business on the day prior to the acquisition, equal to approximately $42,500 and (ii) the payment of approximately $19,000 in cash. The purchase price was allocated to the fair value of assets as follows:


Equipment	$	11,000
Other Assets		100
Goodwill		50,400

Total	$	61,500

As of January 31, 2005, management tested the goodwill for impairment and concluded that it had been impaired. Therefore, we had recognized a charge of $50,400 for the write-off of goodwill in the year ended July 31, 2005.

In addition, TComm Limited agreed not to compete with the business conducted by Pixaya for a period of two years from the closing date of the transaction. The Business Sale Agreement also contained customary representations and warranties. TComm Limited had agreed to indemnify Pixaya for any damages which may result from a breach of its warranties but only if the damages exceed approximately $20,000. TComm Limited had entered into a lockup agreement with us pursuant to which it had agreed not to sell or otherwise transfer its shares of our common stock for a period of one year.

In connection with entering into the Business Sale Agreement, Pixaya entered into employment agreements on November 24, 2004 with four individuals, all of whom were previously employed by TComm Limited. All of such employment agreements have been terminated.

Pursuant to the employment agreements, we granted options to purchase 220,000 shares of common stock with exercise prices ranging from $.50 — $1.00 as additional compensation for services to be rendered under such contracts. The aggregate estimated fair value of the options at the date of issuance of $51,200 is being recognized over the term of the employment agreements.

Pixaya had no significant revenues from its inception in November 2004 through October 31, 2007.

Liquidity and Capital Resources:

We only generated revenues of approximately $203,000, $167,000, $240,000 and $37,000 and we incurred net losses of approximately $11,775,000, $3,637,000, $1,889,000 and $412,000 and negative cash flows from operating activities of approximately $449,000, $2,194,000, $1,524,000 and $261,000 for the years ended July 31, 2007, 2006, and 2005 and the three months ended October 31, 2007, respectively. As of October 31, 2007, we had a

104

working capital deficiency of approximately $9,550,000. As a result, we believe there is substantial doubt about our ability to continue as a going concern and our independent auditors included an explanatory paragraph to emphasize such doubt in their report on the audit of our financial statements for the years ended July 31, 2007, 2006 and 2005 included in this Consent Solicitation/Prospectus.

We believe that, in the absence of a substantial increase in subscription revenues or sales of our streaming video products, it is probable that the we will continue to incur losses and negative cash flows from operating activities through at least October 31, 2008 and that we will need to obtain additional equity or debt financing to sustain our operations until we can market our services, expand our customer base and achieve profitability or effect a merger.

We believe that we will be able to obtain sufficient financing, directly, for example, possibly from YA Global, or find an appropriate merger candidate that has such financing to enable us to continue as a going concern through at least March 31, 2009. However, if we cannot obtain sufficient additional financing by that date, we may be forced to restructure our operations, file for bankruptcy or entirely cease our operations. We believe that a merger with Cryptometrics will provide sufficient cash and additional resources for us to continue as a going concern.

We have entered into a merger agreement with, among others, Cryptometrics, Inc. pursuant to which Cryptometrics would merge with a newly created subsidiary of ours. As part of the proposed merger, Cryptometrics has paid various legal and accounting costs related to the merger agreement on our behalf. The payments, totaling approximately $810,000 through October 31, 2007, will not be repaid by us to Cryptometrics in the event that the merger is not successfully completed. The payments have been charged to operating expenses and recorded as a contribution to additional paid-in capital. Each of Cryptometrics and JAG media has agreed to pay its own future expenses.

Other Equity Transactions

On April 9, 2002, we entered into an agreement with an investment partnership, YA Global, pursuant to which we had, in effect, “put” options whereby, subject to certain conditions, we were able to require the YA Global to purchase shares of our common stock from time to time at prices based on the market value of our shares at an aggregate purchase price of $10,000,000. The equity line became available on August 28, 2002 and was extended in July 2004 for an additional 24 months through August 2006 unless it was terminated earlier by us in our sole discretion. As of May 25, 2006 the Equity Line was effectively cancelled.

The purchase price was 95% of the lowest closing bid price of our common stock over a specified number of trading days commencing on specified dates. YA Global was entitled to a cash fee equal to 5% of the gross proceeds received by us from YA Global in connection with each put. We had issued 10,000 shares of our common stock to a placement agent as of the effective date as consideration for their services in connection with the Equity Line Purchase Agreement.

As of May 25, 2006, the date the Equity Line was effectively cancelled, we had received gross proceeds of $4,035,000 from the exercise of put options.

On January 25, 2005, we entered into a Promissory Note Agreement with YA Global for a loan of $2,000,000. The $2,000,000 loan from YA Global was funded on February 2, 2005 net of a debt discount of $100,000 deducted at the time of funding which was being amortized over the original term of the loan. The unamortized debt discount was $31,674 as of May 25, 2006 when the promissory note was converted into common stock and a secured convertible debenture. On August 5, 2005, we and YA Global agreed, as permitted under the promissory note to extend for three months the date by which we must pay all amounts due under the promissory note. The face amount of the promissory note (as amended) and interest on the amount from time to time outstanding at a rate of 12% per year was payable either (i) out of the net proceeds to be received by us upon delivery of put notices under the Equity Line Agreement or (ii) in full by us within 753 calendar days of January 25, 2005 regardless of the availability of proceeds under the Equity Line Agreement, unless an extension were mutually agreed to by the parties in writing.

Pursuant to the promissory note, we agreed to deposit in escrow 35 put notices under the Equity Line Agreement in an amount of $60,000 each and one request for a put under the Equity Line Agreement in an amount of $181,017. Under the terms of the promissory note (as extended), the put notices were to have been held in escrow and released every fourteen (14) days commencing November 4, 2005.

105

Upon an event of default (as defined in the promissory note), the entire principal balance and accrued interest of the promissory note, and all of other obligations of our Company under the promissory note, would become immediately due and payable without any action on the part of YA Global.

All put notices were canceled and returned to us on May 25, 2006, when we terminated the Equity Line Agreement with YA Global, converted $250,000 of the principal of its $2,000,000 Promissory Note payable to YA Global into 1,250,000 shares of our common stock which were issued on such date for which the fair value was $400,000, and converted the remaining principal amount of $1,750,000 and accrued interest of $150,000 on the promissory note into a secured convertible debenture in the principal amount of $1,900,000. As the cash flows of the new debentures are substantially different from those of the promissory notes, the restructuring qualified as an extinguishment for financial accounting purposes. Accordingly, we recorded a loss on extinguishment of $77,373 during the year ended July 31, 2006 (representing the fair value of the shares in excess of the principal converted plus $31,674 of debt discount written off less $104,301 of accrued interest forgiven). In addition, we issued similar secured convertible debentures to YA Global in the principal amounts of $1,250,000 on May 25, 2006 and $1,000,000 on May 31, 2006, which provided us with net proceeds of approximately $2,025,000 after fees and costs which were recorded as part of the debt discount on the debentures. All the secured convertible debentures bore interest at the rate of 10% per year and were scheduled to mature three years after issuance. They were convertible through maturity into shares of our common stock as provided in the debentures. All of the debentures have been converted as of January 31, 2008.

We were required to issue irrevocable transfer agent instructions relating to the issuance of stock certificates on conversion of the debentures or exercise of the warrants. We were also required to deliver on behalf of ourselves and our subsidiary, Pixaya LLC (formerly JAG Media LLC), security agreements executed by us and our subsidiary, Pixaya LLC, granting YA Global a security interest in all their respective assets. We and our subsidiary can not incur any further liens, declare a dividend, issue any guarantees or incur any new indebtedness in excess of $25,000 other than trade accounts payable. The security agreements terminate once a registration statement covering shares of common stock issuable upon conversion has been effective for 60 days. At such time, the security interest will automatically terminate provided our common stock is trading on the OTC Bulletin Board at a price above $0.08 per share and there has occurred no event of default under the convertible debentures. The security interest was terminated by YA Global as of January 31, 2008.

YA Global had the right to convert the debentures, at its sole option, into shares of our common stock at a conversion price which was the lower of (i) $0.40 per share or (ii) a 10% discount to the lowest volume weighted average price, as reported by Bloomberg LP, of our common stock during the 30 trading days prior to the conversion date.

As of July 31, 2006, the debentures were carried at approximately $2,027,000 reflecting the outstanding principal balance due on the notes of $4,075,000 reduced by debt discounts aggregating $2,048,000 after amortization. As of July 31, 2007 the debentures are carried at approximately $2,607,000, reflecting the outstanding principal balance due on the notes of $3,520,000 reduced by debt discounts aggregating approximately $913,000. As of October 31, 2007, the debentures had a net carrying value of approximately $1,132,000, reflecting the remaining outstanding principal balance due of $1,920,000 reduced by remaining unamortized debt discounts aggregating approximately $788,000.

In connection with the foregoing May 25, 2006 transaction, we issued warrants to YA Global to purchase 12,000,000 shares of common stock. The warrants are exercisable through May 2011 at prices ranging from $0.40 to $0.80 per share. The exercise price and number of shares issuable to each of the warrants are subject to anti-dilution provisions. A warrant was exercised to the extent of 700,000 shares at an exercise price of $0.40 per share on January 31, 2008.

Since the conversion of the secured convertible debentures and the related warrants could result in the issuance of an indeterminable number of common shares since they are convertible at a discount from the market price, we determined that based on the guidance in the consensus for Emerging Issues Task Force Issue No. 00-19 (“EITF 00-19”) “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in a Company’s Own Stock”, we were prohibited from concluding that we will have a sufficient number of authorized and unissued shares to net-share settle any of those warrants or any other warrants or options previously issued or granted to non-employees.

106

As of May 25, 2006, the warrants for the purchase of 12,000,000 shares were valued at $3,820,000 based on the Black-Scholes options pricing model assuming a risk free interest rate of 6% annually, no dividend payments, annual volatility of 335.722%, exercise prices ranging from $0.40 to $0.80, and the stock price of $0.32 when issued. Accordingly, we recorded additional debt discount of $2,025,000 to offset the net cash proceeds received from YA Global for the debentures and a finance charge to operations of $1,795,000 to reflect the excess of fair market value of the warrants over the debt proceeds. As of July 31, 2006, the fair value of the warrants was recalculated using the Black-Scholes options pricing model assuming a risk free interest rate of 6% annually, no dividend payments, annual volatility of 338.441%, exercise prices ranging from $0.40 to $0.80, and the stock price of $0.23 when valued and resulting in a decrease in the carrying value of the derivative liability to approximately $2,744,000 and an unrealized gain on derivative liability of $1,076,000 for the year ended July 31, 2006.

As of July 31, 2007, the fair value of the warrants was recalculated using the Black-Scholes options pricing model assuming a risk free interest rate of 6% annually, no dividend payments, annual volatility of 216.543%, exercise prices ranging from $0.40 to $0.80,and the stock price of $0.95 when valued and resulting in an increase in the carrying value of the derivative liability to approximately $11,059,000 and an unrealized loss on derivative liability of approximately $8,524,813 for the year ended July 31, 2007. As of October 31, 2007, the fair value of the warrants was recalculated using the Black-Scholes option pricing model assuming a risk free interest rate of 6% annually, no dividend payments, annual volatility of 209.285%, exercise prices ranging from $0.40 to $0.80 per share, and the stock price of $0.82 per share when valued and resulted in an decrease in the carrying value of the derivative liability to approximately $9,069,000 and an unrealized gain on derivative liability of approximately $1,989,000 during the three months ended October 31, 2007.

As explained above, EITF 00-19 required us to record the fair value of the warrants issued in connection with the debentures at their gross value of approximately $3,820,000 and fully offset the net proceeds received with an equivalent amount of debt discount. As a result, there was no amount allocable to the net carrying value of the convertible debentures upon issuance on May 25, 2006 although they could have been converted as of that date into 6,756,757 shares of common stock with an aggregate fair value of approximately $2,252,000. This amount represents a beneficial conversion feature that could not be recorded in the consolidated financial statements since it would have resulted in the recording of an aggregate debt discount that would have exceeded the net proceeds from the issuance of the debentures which is prohibited by EITF 00-19.

The issuance of convertible debentures and warrants to YA Global also caused us to record the fair value of 200,000 options issued to a consultant from stockholders’ equity to the derivative liability. As of May 25, 2006, the options were valued at approximately $64,000 using the Black-Scholes option pricing model. As of July 31, 2006, the fair value of the options was recalculated which resulted in a decrease in the carrying value of the derivative liability to approximately $46,000 and the recognition of an unrealized gain on derivate liability of $18,000 for the year ended July 31, 2006. On October 2, 2006, we granted options to another consultant with a fair value of approximately $36,000 which is being amortized over the service period. The fair value at the date of the grant was determined using the Black-Scholes option pricing model assuming a risk free interest rate of 6% annually, no dividend payments, annual volatility of 340.641%, an exercise price of $0.05 per share, and the stock price of $0.18 per share when issued. On February 21, 2007, a consultant exercised options to purchase 200,000 shares of common stock at $0.02 per share resulting in proceeds of $4,000 and reclassification of $116,000 (the fair value of the options at the exercise date) from the derivative liability to equity. On June 11, 2007, a consultant exercised options to purchase 200,000 shares of common stock at $0.05 per share resulting in proceeds of $10,000 and reclassification of $176,000 (the fair value of the options at the exercise date) from the derivative liability to equity. On July 11, 2007, the exercise price of options to purchase 140,000 shares of common stock previously issued to employees was reduced from prices ranging from $0.50 to $1.00 to $0.21. The reduction in the exercise prices was made as payment for services charged to operating expenses with corresponding credits to equity. As required by SFAS 123(R), incremental compensation of approximately $4,000 was recognized for the excess of the fair value of the modified award over the fair value of the original award immediately before the modification. The fair value of the options at the date of the modification was determined assuming a risk free interest rate of 6.0% annually, no dividend payments, annual volatility of 216.54%, an exercise price of $0.21 and a stock price when modified of $1.17 per share.

As of July 31, 2007 all the options to non-employees had been exercised or expired.

107

During the year ended July 31, 2006, YA Global converted debentures in the principal amount of $75,000 into 404,955 shares of our common stock. As of the dates of conversion, the conversion price was at a 10% discount to the lowest volume weighted average price, as reported by Bloomberg, LP, of our common stock during the 30 trading days prior to the conversion date and we recorded a loss on conversion of approximately $75,000. We recorded amortization of debt discount attributable to the debentures of approximately $202,000 during the year ended July 31, 2006, including $75,000 which was accreted as a result of the conversion. As of July 31, 2006, the debenture had a net carrying value of approximately $2,027,000 reflecting the outstanding principal balance due of $4,075,000 reduced by remaining unamortized debt discounts aggregating approximately $2,048,000.

During the year ended July 31, 2007, YA Global converted debentures in the principal amount of $555,000 into 4,432,111 shares of our common stock. We recorded amortization of debt discount attributable to the debentures of approximately $1,135,000 during the year ended July 31, 2007, including $555,000 which was accreted as a result of the conversion. As of July 31, 2007, the debentures had a net carrying value of approximately $2,607,000 reflecting the outstanding principal balance due of $3,520,000 reduced by remaining unamortized debt discounts aggregating approximately $913,000. During the three months ended October 31, 2007, YA Global converted debentures in the principal amount of $1,600,000 into 4,000,000 shares of the Company’s common stock. The Company recorded amortization of debt discount attributable to the debentures of approximately $125,000 during the three months ended October 31, 2007. As of October 31, 2007, the debentures had a net carrying value of approximately $1,132,000, reflecting the remaining outstanding principal balance due of $1,920,000 reduced by remaining unamortized debt discounts aggregating approximately $788,000.

During the three months ended October 31, 2007, we issued options for the purchase of 655,000 shares of common stock to non-employees valued at approximately $338,000 based on the Black-Scholes option pricing model assuming a risk free interest rate of 6% annually, no dividend payments, annual volatility ranging from 210.949% to 216.543%, and exercise prices ranging from $0.60 to $0.86 per share when issued.

During the three months ended October 31, 2007 consultants to JAG Media exercised options to purchase 905,000 shares of common stock at prices ranging from $0.02 to $0.86. Proceeds of $78,750 for the exercise of options to purchase 125,000 shares of common stock at $.063 per share were not received until November 14, 2007 and, accordingly, the balance receivable was included in other current assets at October 31, 2007. We received proceeds of $398,200 upon the exercise of options to purchase 780,000 shares of common stock at prices ranging from $0.02 to $0.86 during the three months ended October 31, 2007.

Recent Events. Various previous amendments to the above described convertible debentures and warrants, relating principally to their exercisability and contingent on the proposed Merger with Cryptometrics being timely consummated, expired by their terms on December 15, 2007. From November 1, 2007 through January 30, 2008, YA Global converted $1,595,000 of the principal amount of our outstanding secured convertible debentures into 3,987,500 shares of our common stock. On January 31, 2008, we entered into a letter agreement with YA Global amending the terms and conditions of such debentures and warrants and other related documents. Under the letter agreement, YA Global agreed to convert the remaining $325,000 outstanding principal balance of the convertible debentures as well as all accrued and unpaid interest on such debentures in the aggregate amount of $535,679 into restricted shares of our common stock. As a result of such conversions, on January 31, 2008 we issued 2,151,699 restricted shares of our common stock to YA Global. In addition, YA Global agreed to exercise, at the previously agreed exercise price of $0.40 per share, a warrant to the extent of 700,000 shares of our common stock, as a result of which JAG Media received $280,000 in cash.

As a result of the conversion and termination of the debentures, the restrictive covenants in the securities purchase agreement, dated May 4, 2006, under which the debentures and warrants were issued, as well as the related security agreements discussed above, share reservation instructions and the related registration rights agreement were all terminated as of January 31, 2008.

We and YA Global also amended the exercise price and dates of the remaining warrants. The warrant exercise price will be 88% of the average of the Volume Weighted Average Price of the common stock during the 30 trading

108

days prior to their respective exercise restriction date. The exercise restriction date, which is the date after which a warrant may be exercised, is as follows:


1,300,000 shares		30 trading days following the Closing of the proposed Merger between JAG Media and Cryptometrics Inc.
2,000,000 shares		March 31, 2008
2,000,000 shares		June 30, 2008
3,000,000 shares		September 30, 2008
3,000,000 shares		December 31, 2008

This agreement as to the warrant exercise price and the exercise restriction dates terminates on February 27, 2008 if the Merger has not yet occurred by that date.

We and YA Global also agreed to increase the permitted maximum beneficial ownership of JAG Media’s common stock by YA Global as set forth in the warrants from 4.99% to 9.99% of the outstanding shares of such common stock.

Seasonality

We do not believe that our business is subject to seasonal trends or inflation. On an ongoing basis, we will attempt to minimize any effect of inflation on our operating results by controlling operating costs and whenever possible, seeking to insure that subscription rates reflect increases in costs due to inflation.

Recent Accounting Pronouncements

The FASB and the Accounting Standards Committee of the American Institute of Certified Public Accountants had issued certain accounting pronouncements as of July 31, 2007 that will become effective in subsequent periods; however, we do not believe that any of those pronouncements would have significantly affected our financial accounting measurements or disclosures had they been in effect during the year ended July 31, 2007 and 2006 or that they will have a significant effect at the time they become effective.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157). SFAS defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 does not require new fair value measurements. We are required to adopt SFAS for our fiscal year beginning August 1, 2008. We do not anticipate that the implementation of this standard will have a material impact on its consolidated financial position, results of operations or cash flows.

In June 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements in accordance with Statement No. 109, “Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a company’s tax return. FIN 48 is effective for fiscal years beginning after December 15, 2006 and will, therefore, be effective for our fiscal year beginning August 1, 2007. We do not expect the adoption of FIN 48 to have a material effect on the financial statements.

In February 2007, the FASB issued SFAS 159 “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. SFAS 159 will be effective for our company on August 1, 2008. We are currently evaluating the impact of the adoption of SFAS 159 will have, if any, on our financial statements.

109

BUSINESS OF CRYPTOMETRICS

BUSINESS OVERVIEW

Since its founding in June 2000, Cryptometrics has been a provider of biometric technology solutions. Unlike many other biometric technology providers who either offer core biometric software products (e.g. fingerprint matching and face recognition software) or integrate these products to form turnkey solutions, Cryptometrics realizes its solutions by combining core biometric technology with a patented and patent pending technology it has invented to more effectively capture biometrics to permit preprocessing of such captured biometric data so as to realize an overall improvement in identity confirmation and technology specifically designed to integrate, capture and process biometrics within a specific business process.

Anticipating market needs, Cryptometrics initially focused on creating a method of protecting computerized systems and information assets by combining fingerprint technology with fingerprint capture/authentication devices and public key infrastructure technology. Cryptometrics FingerSURE(R) fingerprint verification products raise the level of security by requiring users to authenticate their identity via fingerprint verification not only at log on, but at user defined, critical points throughout the entire business process.

Through the acquisition of BioDentity Systems Corporation in March 2004 and its subsequent transition to the wholly owned subsidiary, Cryptometrics Canada, Inc., Cryptometrics moved to address a further emerging market need to provide next generation face biometric authentication technologies and solutions specifically designed to secure national borders, protect the traveling public, protect the critical infrastructure of a country, and support law enforcement, homeland security and first responder activities. Cryptometrics SecurIDent^tm facial recognition products and ID(2)PASS^tm solutions have an ability to capture facial images in real world settings, including at distances up to 75 feet without active participation of an individual. Through the application of patented and patent pending technology Cryptometrics believes that its SecurIDent^tm facial recognition products and ID(2)PASS^tm solutions will raise overall performance of identity confirmation beyond levels achievable using strictly commercial off-the-shelf biometric software. These products and solutions may be used to secure the issuance of passports and a wide range of national identification documents in addition to securing ports of entry such as at airports, seaports and land borders.

BUSINESS STRATEGY

Cryptometrics intends to continue to expand its business offerings to deliver solutions for the financial services, healthcare, government and educational sectors, as well as travel and identification document provision, border clearance, aviation security, critical infrastructure protection, law enforcement and customer service and customer relationship management. Cryptometrics intends to pursue a sales channel strategy that will include both direct and partner revenue streams. Cryptometrics is currently working with companies that specialize in system integration to deliver its hardware and software technology and integrated solutions to a number of vertical markets.

The use and application of the Cryptometrics’ fingerprint biometric offerings is designed to be complete across the enterprise of any organization. Cryptometrics believes this is fundamental to delivering a more comprehensive and effective means of cyber asset protection. It is essential that networked computerized control systems are protected from a range of threats. It is equally critical that as more and more desktop computers are converted to the more accommodating mobile devices (e.g. laptop computers, personal hand-held devices) steps are taken to protect the wealth of personal and business data and access credentials they house.

Cryptometrics believes that the use of its facial biometrics offerings has the potential to play a critical role in enabling the deployment of biometric travel documents (e.g. the new ePassport) and installing enhanced border clearance systems and processes world-wide. Cryptometrics believes that the use of its facial biometrics offerings may play an essential role in the developing generation of proactive protection vital for dealing with international and domestic terrorism.

Cryptometrics’ facial biometric offerings and technology have recently been validated as a superior technology in the industry. Through specific tender and bid processes in certain regions of the Middle East, test results for Cryptometrics’ offerings were ranked number one when Cryptometrics competed side by side with leaders in the industry.

110

PRODUCTS

Cryptometrics is a provider of a new generation of biometric solution, focused on making biometrics work successfully in large scale public implementations while at the same time working to develop the critical technology necessary to enable identity confirmation performance levels to surpass that produced when simply using the latest commercially available biometric technology. Cryptometrics believes that its solutions are designed to deal with the some of the most pressing issues facing today’s public and private sectors, from protecting access to vital information held on computers to achieving enhanced security for global travel.

To date Cryptometrics has developed and launched solutions relying on both face and fingerprint biometrics. For instance, with respect to use of core biometric technology; i.e. in the case of fingerprint solutions, Cryptometrics applications use a wide range of wireless and wired fingerprint devices, and in the case of facial solutions, Cryptometrics applications are fully compatible with existing commercially available, off-the-shelf face recognition software.

Cryptometrics’ fingerprint imaging offerings are designed to address a broad spectrum of industries including healthcare, governmental, education and financial services institutions that are susceptible to a host of authentication, access control, communications and online data management security vulnerabilities.

Cryptometrics’ facial imaging offerings are designed to address pressing security issues associated with the issuance of travel and identification documents, inspection of people seeking entry into a country at border points, aviation security and law enforcement.

Sales of Cryptometrics’ products may be broken down into two classes: fingerprint imaging offerings and facial imaging offerings. In Cryptometrics’ fiscal years ending April 30, 2005, 2006 and 2007, fingerprint imaging offering sales were none, $8,688 and $559,503 respectively, and facial imaging offering sales were $681,854, $206,973 and $734,340, respectively. The following is a further breakdown of sales of specific products described below within such two offerings for each of the last three fiscal years of Cryptometrics.


	Fiscal Year Ending April 30,
PRODUCT SALES REVENUES	2005		2006		2007

FingerSURE^tm (finger imaging) Products
Enterprise			$	6,042	$	31,383
Professional			$	2,646	$	1,130
Devices					$	496,990
Software Development Kit					$	30,000
SecureDent^tm (facial imaging) Products
Face Biometric Enrolment Application Tools	$	114,276	$	5,208	$	30,000
Face Biometric Quality Management	$	116,010	$	120,000	$	106,625
Live Enrolment Cameras	$	21,069			$	308,574
Photo Enrolment Unit	$	19,637
Identity Management Controller
Lookout Engine					$	79,989
Fraud Detection	$	126,416
Applicant Identification	$	119,256	$	81,765	$	209,152
Watchlist Check	$	37,366
Vitalert^tm	$	117,824
Photofind^tm	$	10,000

TOTAL	$	681,854	$	215,661	$	1,293,843

111

CRYPTOMETRICS FINGERPRINT IMAGING OFFERINGS

Cryptometrics offers a line of fingerprint authentication products under the trade name FingerSURE^tm. Cryptometrics believes these offerings provide users with a high level of information asset security by utilizing biometric user-authentication systems. FingerSURE^tm technology combines convenience with extended levels of security, including the ability to store sensitive personal security information on a biometric device. FingerSURE^tm uses public key technology for securing the transfer between the device and the computer and the storage of sensitive information, data, and user credentials. FingerSURE^tm provides a central location for the secure enrollment and verification of biometric templates and authentications. Cryptometrics believes FingerSURE^tm solutions deliver a high level of user authentication and access control.

Key FingerSURE^tm product offerings include:

FingerSURE^tm Enterprise

FingerSURE^tm Enterprise is a comprehensive biometric fingerprint authentication offering available to companies and organizations. Ideal for large businesses, FingerSURE^tm Enterprise integrates with Microsoft^® Active Directory^® to offer companies and employees the ability to authenticate at any place and time while connected to the corporate network by simply using their fingerprint. The audit capabilities provided in the FingerSURE^tm line of products allow companies to comply with all industry and government policies and procedures requiring absolute identification of individuals and transactions.

Benefits of FingerSURE^tm Enterprise include:


	•	User verification with the touch of a finger;

	•	Integration with Microsoft Active Directory — all user management is through centralized control;

	•	File and folder encryption/decryption using RC4 128-bit encryption;

	•	Session-based encryption — communication through client/server is a secure tunnel;

	•	Record retention of who gains access when and where for internal audits;

	•	Provision of simple system and Internet access with the touch of a finger;

	•	Protection of sensitive data stored on systems, including work in progress;

	•	Provision superior network security;

	•	Support of unlimited users;

	•	Support of single sign-on;

	•	Management of an unlimited amount of secure websites and Internet portals; and

	•	Preservation of personal desktop settings.

FingerSURE^tm Professional

FingerSURE^tm Professional is a biometric security solution offered to small to medium-sized businesses. FingerSURE^tm Professional allows users to protect access to their systems and data, provides access to network domains and protects critical data file access using biometric user-authentication.

Benefits of FingerSURE^tm Professional include:


	•	User verification with the touch of a finger;

	•	Fast, effortless logins;

	•	Protection of sensitive data stored on systems, including work in progress;

	•	Provision of superior network security;

112


	•	Support of unlimited users;

	•	Support of single sign-on;

	•	Management of an unlimited amount of secure websites and Internet portals;

	•	Record retention of who gains access when and where for internal audits; and

	•	Preservation of personal desktop settings.

FingerSURE^tm WORKSPACE

FingerSURE^tm WORKSPACE is the interface between the biometric login device and the operating system. FingerSURE^tm WORKSPACE replaces traditional password management processes such as regular password changes, reset of passwords and storage of passwords with the convenience of using the biometric login device. The system also secures the unattended workstation by requiring biometric re-authentication for manually locked and/or timed-out workstations.

FingerSURE^tm WEBSECURE

FingerSURE^tm WEBSECURE enables secure biometric login to sensitive websites and to web-based forms. The user registers the Web page, and when prompted, supplies his login credentials. The credentials are then stored, and provided to the Web page on its next access after the user biometrically authenticates.

FingerSURE^tm BIO-SSO

FingerSURE^tm BIO-SSO provides single sign-on to third-party applications through the proxy of the user’s credentials. FingerSURE^tm BIO-SSO interacts directly with the third-party application to provide required credentials and biometric authentication when requested.

FingerSURE^tm FILE ENCRYPTION

FingerSURE^tm FILE ENCRYPTION provides protection for information and data by encrypting files and folders on hard drives or external devices. This product also allows for individual access to encrypted material.

FingerSURE^tm TRUSTED DEVICE SUPPORT

FingerSURE^tm solutions integrates biometric devices which Cryptometrics believes elevates security to a heightened level. Biometric devices have custom software providing full functionality between logical assets and the authentication devices. Cryptometrics believes that FingerSURE^tm presents a unique solution to biometric authentication by using devices with strong cryptographic capabilities. These devices connect to the local PC by means of a wireless Bluetooth^® connection. Cryptometrics leverages the characteristics of the device to provide customers with a full function logical desktop access product.

FingerSURE^tm SDK

FingerSURE^tm Software Development Kit provides an application program interface for third parties to integrate the power of FingerSURE^tm authentication into their applications. With the FingerSURE^tm Software Development Kit clients can request secondary authentications whenever they need to verify the identity of a user performing an action with their software.

FingerSURE^tm EFS

Cryptometrics believes that FingerSURE^tm can increase the security of using Microsoft^® Encrypting File System. By using Encrypting File System with a FingerSURE^tm Trusted Device Support, FingerSURE^tm allows for the secure management of the decryption key for protected files on a computer’s hard drive. Once the key has been entrusted to FingerSURE 7.0, access to the key is controlled through biometric authentication and the key is moved

113

off the local workstation and onto the trusted device. If the laptop is lost or stolen, the key used for the decrypting of the files is not lost or stolen as well. The key remains securely stored and protected by FingerSURE^tm 7.0.

FingerSURE^tm ENTERPRISE ADMINISTRATOR

FingerSURE^tm ENTERPRISE ADMINISTRATOR integrates directly into the Microsoft^® Management Console for Users and Groups. By integrating directly into the Microsoft^® Management Console for Users and Groups, Cryptometrics believes that FingerSURE^tm provides a single point of administration for user management and biometric authentication management. By utilizing Microsoft^®Management Console for Users and Groups and Microsoft Active Directory^®, a single point of presence is created for any use enrolled in FingerSURE^tm Enterprise 7.0.

CRYPTOMETRICS FACE BIOMETRIC OFFERINGS

Cryptometrics offers a line of face biometric products under the trade name SecurIDent^tm. These offerings are designed to address the pressing needs of:

Government


	•	More secure issuance of passports, visas and identification documents

	•	Secure facilitation of persons seeking entry at border entry points

	•	Protection of critical infrastructures and key assets of the nation

	•	Improved aviation security

	•	Improved levels of law enforcement

	•	Improved facilitation and greater security for customer service delivery and customer relationship management

Law Enforcement


	•	New technology and solutions designed to realize better and more pre-emptive law enforcement and protection of citizens

Private Sector


	•	New technology and solutions designed to realize better protection of customers and staff

	•	Improved facilitation and greater security for customer service delivery and customer relationship management

FACE BIOMETRIC ENROLMENT PRODUCTS AND SOLUTIONS

Cryptometrics has invented a suite of enabling technology which it believes is fundamental to:


	•	Capturing and enrolling the most effective face biometric sample(s), whether that be derived from a photograph or captured live;

	•	Ensuring that all capture devices continuously operate at maximum performance; and

	•	Ensuring that all captured face biometric samples meet the special needs of their intended use, whether that be the encoding of the Contactless Chip in a new ePassport, creation of a master photo/facial image database or printing of a portrait in a passport or on another form of travel or identification document.

ENROLMENT SOFTWARE

Cryptometrics offers a suite of software packages, devices and integrated solutions designed specifically to enable enrolment of the high quality face biometric.

114


	•	SecurIDent^tm Face Biometric Enrolment Application Tools — Software Development Kit and Run License versions allow software developers to implement all of the critical functions required to successfully capture the facial image and biometric using their own application software. An inherent feature of the Tools is Auto Eye Landmark Determination (finding) logic.


	•	SecurIDent^tm Face Biometric Quality Management Software represents a fully automated facial image and face biometric quality assessment and assurance software tool. It evaluates such key quality influencers as:

	•	Key image quality characteristics;

	•	Position of the head;

	•	Resolution across the face;

	•	Position of face;

	•	Tilt of the head; and

	•	Rotation of the head.

The software performs a series of checks designed to confirm suitability of the biometric sample for use with any of the currently available commercial off-the-shelf face recognition software packages. It runs an equally extensive series of checks to confirm alignment with the photo and facial biometric guidelines set down by the enrolment authority.

ENROLMENT DEVICES

Cryptometrics offers a suite of devices designed to enroll a highly effective face biometric sample:


	•	SecurIDent^tm Live Enrolment Cameras overcome the many operational and quality problems associated with the use of standard cameras for face biometric capture by:

	•	Automatically capturing the image/sample at prescribed resolutions offering best face recognition performance;

	•	Automatically compensating for lighting effects using software driven face area exposure control;

	•	Automatically isolating the best pose to use in face recognition; and

	•	Automatically cropping the captured image to meet predefined specifications for size and location of the facial region.

Cameras are supplied with interface and control software.


	•	SecurIDent^tm Photo Enrolment Unit overcomes the numerous operational and quality problems associated with the use of page scanners for face biometric capture (i.e. derivation) from photographs by:

	•	Automatically locating the face within the photograph and adjusting the image capture using superior optical techniques — as versus digital manipulation — to standardize the overall size of the facial region;

	•	Automatically capturing the image at prescribed resolutions offering best face recognition performance;

	•	Automatically compensating for exposure effects using software driven face area exposure control; and

	•	Automatically cropping the image to meet predefined specifications for size and location of the facial region.

The Unit accelerates the process of capturing images for recording in a database, enhancing the images to an optimal uniform size and quality with minimal to no operator assistance. Units are supplied with interface and control software.


	•	SecurIDent^tm Identity Management Controller is a fully scalable, computerized appliance capable of working with many different software platforms and comprising the necessary hardware and software components to support a variety of key face matching tasks. A Controller can be configured to accommodate

115


		the volume, performance and processing requirements of a given client. Each Controller houses the mandatory face recognition software on a SecurIDent^tm Face Rec Manager, which hosts one or more, commercial off-the-shelf face recognition software packages to create the comparative face recognition findings. The Manager also houses software logic developed by Cryptometrics to raise the performance of the core face recognition software beyond that which it can achieve operating on its own.

The SecurIDent^tm Identity Management Controller is designed to house one or both of the following optional engines:


	•	SecurIDent^tm Lookout Engine, carries Lookout (Watch List) Checks. The Lookout Engine works in cooperation with the SecurIDent^tm Face Recognition Manager to deliver a strong Lookout Check based solely on the facial biometric. Only the face biometric can be used to carry out a lookout check.

The Lookout Engine returns an ordered summary of “hits”, showing those persons from the Lookout List most like the person being checked. The hits are ranked in order of likeness.

The SecurIDent^tm Lookout Engine is face recognition software capable of working with many other software platforms.


	•	SecurIDent^tm Fraud Detection Engine is designed to check large photo/facial image databases to determine if the person being enrolled is already enrolled, but under a different identity. Cryptometrics has created a design in which the entire master database is checked.

Each of the above optional engines can be installed and configured prior to on-site installation of the SecurIDent^tm Identity Management Controller or directly in the field.

Operational management of the Controller is directed, monitored and maintained by control software created by Cryptometrics.

INTEGRATED SOLUTIONS

Cryptometrics offers a number of integrated solutions that combine the individual SecurIDent^tm software and device offerings with other hardware and software components to realize a fully functional subsystem capable of supporting a specific enrolment related task or series of tasks. Integrated solutions currently offered include:


	•	SecurIDent^tm Live/Photo Capture Solutions automate the capture of live facial images and/or photographs (passport photos and the like), realizing high quality facial images, as well as globally interoperable face biometric samples; the latter specifically designed to enable and enhance a wide range of face recognition supported applications.

A SecurIDent^tm Live/Photo Capture Solutions typically include (1) SecurIDent^tm Live Capture Camera(s) or SecurIDent^tm Photo Capture Unit(s), (2) one or more of the enrolment software offerings and (3) live/photo capture Application Software.

The Application Software automatically controls the operation of either a smart live capture camera or a smart photo capture unit, processing the derived image to ensure that the image(s) and the corresponding biometric sample(s) meet the specifications defined by the Enrolment Authority for facial image/photo capture and set out in the new International Standards governing the global interchange of facial biometrics.


	•	SecurIDent^tm Applicant Identification Solutions are fully integrated hardware and software solutions designed to support a client application by managing all those activities associated with confirming the identity of the person being enrolled.

SecurIDent^tm Applicant Identification Solutions comprise process control software tailored to meet the unique needs of the application (e.g. passport issuance, visa issuance, national identification issuance, drivers license issuance, etc.) and state-of-the-art technologies developed by Cryptometrics, the latter enabling effective and optimum enrolment of either live captured facial images or images derived from photographs.

116

Solutions typically offer the following features:


	•	Face match check(s) against any on-file image(s) of the same person (a.k.a. verification);

	•	Face match check(s) against a Watch List to isolate those persons that should be checked in greater detail;

	•	Fraud check(s) against the entire on-file database to ensure the same person is not already in the database under a different name;

	•	Construction and maintenance of a face biometric based Watch List;

	•	Configuration of system response when performing a Watch List check;

	•	Construction of a optimized stored facial image representation that ensures: (i) optimum facial recognition performance; (ii) the ability to successfully derive a new facial recognition template in the future; (iii) the ability to exchange the facial image with other face recognition processing systems and allow direct use (global interoperability); and (iv) the ability to display the image so that a person seeing the image could reasonably confirm the identify of the live person.

	•	SecurIDent^tm Watch List Check Solutions are fully integrated hardware and software solutions designed to support a face based Watch List Check for a client application; for example passport issuance: travel/identification document issuance, drivers license issuance, etc.

SecurIDent^tm Watch List Check Solutions are available to those clients who do wish to only implement a face based Watch List Check and not perform a full series of identity checks like those addressed by the SecurIDent^tm Applicant Identification Solution.

FACE BIOMETRIC IDENTITY CONFIRMATION PRODUCTS AND SOLUTIONS

Cryptometrics has patented and patent pending technology capable of capturing the facial biometric at a prescribed resolution across the face at upwards of 75 feet (22.9 meters). In achieving this goal, Cryptometrics has realized a number of additional successes, which include,


	•	Developing person detection technology which is used to detect and track multiple persons in a 60 (degree) degrees by 22.9 meters 75 feet field of view in front of the camera;

	•	Developing a family of over the counter face biometric capture devices that are 100% solid state and locate and capture facial images simultaneously;

	•	Developing an array of critical software technology; e.g. logic for person detection, face finding, eye finding, simultaneous face detection; and

	•	Developing an array of advanced software technology capable of detecting an exaggerated pose or expression and normalizing each to create a full frontal, expression free pose, critical for optimum face recognition.

Cryptometrics offers a range of devices and integrated solutions designed to capture the facial biometric in real world settings and use the captured sample to determine identity.

DEVICES


	•	SecurIDent BioFACE^tm Capture System captures images of persons within a close to near range location. It represents the capture system for use at primary inspection in border clearance for confirming the identity of a person presenting a new globally standardized ePassport or other form of emerging electronic travel documents.

	•	Systems that rely on standard video cameras: (i) require a person to be cooperative and pose at a specific optimal location in front of the camera; (ii) allow only one person at a time to be processed; and (iii) often

117


		require the inspection officer to manually position the camera. BioFACE^tm overcomes those limiting characteristics with an extensive array of features:


	•	Detects and tracks multiple persons simultaneously within the defined capture area;

	•	Persons do not need to be corralled or forced to position themselves or pose before the camera;

	•	Permits unrestricted movement even through high-volume areas;

	•	Automatically adjusts to compensate for varying lighting conditions;

	•	Automatically selects the most optimum pose and stores a prescribed number of best pose images for use during face recognition;

	•	Displays results on the control workstation;

	•	Works with all facial recognition algorithms;

	•	Secures transfer of cropped, resolution specific images of the face to a SecurIDent^tm Identity Management Controller via standard LAN or WAN (wire or wireless).


	•	Cryptometrics believes that Vitalert ^tm is one of the most advanced camera systems on the market today for performing face recognition at a distance, as well as, advanced warning lookout detection in support of border clearance, high-volume traveler screening at airports, and protection of critical infrastructures and key assets — such as mass transit systems, key public buildings, etc.

Other systems use standard video cameras that require a person to be cooperative and pose at a specific optimal point in front of the camera. Vitalert^tm not only detects and tracks persons automatically regardless of the subject’s distance from the camera or movement patterns, but captures close up images of the face — at prescribed resolutions — automatically. It even isolates the best poses for optimum facial recognition.

Cryptometrics believes that its patented and patent pending Vitalert^tm is one of a limited number of technologies of its kind available offering the following critical features:


	•	Person detection technology detects and tracks multiple persons, stationary or moving within a large target area (60 degrees by 22.9 meters [75 feet]).

	•	Logic steered high-speed pan, tilt and zoom Camera for fast acquisition of close up images of subjects face at a prescribed resolution, regardless of person’s height or movements within a large target area (45(degree) [degrees] by 22.9 meters [75 feet])

	•	Pose detection logic automatically selects the best pose for face recognition.

	•	Lighting compensation logic automatically adjusts the camera to ensure captured images are of the best quality to confirm identity.

	•	Scene analysis subs-system to enable immediate identification of areas within the overall field of view to target.

	•	Face recognition software: works with all facial recognition algorithms.

	•	Secure transfer of cropped face images to SecurIDent^tm Identity Management Controller via standard LAN or WAN (wire or wireless).

	•	Transmits cropped, resolution specific images of the face to ensure fastest recognition and maximum availability of face recognition software for other matching tasks.

	•	Passengers, travelers and other subjects do not need to be corralled or forced to position themselves or pose directly in front of the camera. Permits unrestricted movement even through high-volume areas.

	•	Enhanced Service Delivery Kiosks, developed by Cryptometrics use the facial biometric to deliver improved levels of facilitation. Not only is the identity of the person confirmed and used to activate and deliver the kiosk based service, but where approved by the service provide is also used to carry out Watch List

118


		(Lookout) Checks for immediate detection of those persons that would attempt to abuse the kiosk based service.

While a broad range of components can be integrated to form an Enhanced Service Delivery Kiosk, certain features are standard in each:


	•	Ergonomically designed, high durability enclosure;

	•	Touch Sensitive Display;

	•	Integrated SecurIDent^tm BIOFACE Camera with infill lighting; and

	•	Controller with remote communications.

Optional components include such features as card readers, receipt printers and wireless communication.

A range of Enhanced Service Delivery Process Manager Appliances are available to control the enhanced service delivery process and verification and where implemented, Watch List Checks.

Cryptometrics offers two basic types of Enhanced Service Delivery Kiosks:

1. ID(2)PASS^tm Pre-Enrolled Traveler Kiosk supports inspection where two forms of identification at a port of entry or exit (i.e., a valid travel document and the identity of the document presenter to confirm they are the rightful holder).

2. Enhanced Trusted Service Kiosks supports general delivery of improved levels of customer service and customer relationship management in a broad range of government and private sector applications.

INTEGRATED SOLUTIONS

Cryptometrics offers a number of integrated solutions that combine the individual device offerings with other hardware and software components to realize a fully functional subsystem capable of supporting a specific identity related task or series of tasks, specifically:


	•	ID(2)PASS SecurBorder^tm Solutions represents a comprehensive border clearance solution with fully integrated face biometric capture and processing. Relying on the confirming of two personal forms of identification, one being the person’s valid identification document and the other their biometric identity, ID(2)PASS SecurBorder^tm Solutions enable governments to immediately strengthen border security, while at the same time introduce reading and processing of the new biometrically empowered, globally standardized ePassport.

ID(2)PASS SecurBorder^tm Systems use Cryptometrics fully scalable SecurIDent^tm Identity Management Controller with SecurIDent^tm Face Rec Manager and SecurIDent^tm Lookout Engine.

ID(2)PASS SecurBorder^tm Solutions offer the following key features:


	•	Computer assisted workflow based on the internationally standardized Primary and Secondary inspection process;

	•	Dynamic system architecture supporting LAN, WAN and portable functionality and affordable redundancy;

	•	Fully compatible with standardized machine-readable documents conforming to the United Nation’s International Civil Aviation Organization specifications and ISO Standards;

	•	Built-in document security feature(s) analysis and reporting;

	•	High-speed biographical and document-based Lookout search functionality;

	•	Full compatibility with existing Lookout databases, including the retention of existing Lookout databases as the definitive repository;

	•	Fully integrated machine-assisted identity confirmation based on the face biometric;

	•	Highly reliable Verification and Identification face biometric confirmation;

119


	•	Electronic transfer of referral information to Secondary; and

	•	Controlled access to databases held by other Ministries and Agencies.

PHOTOFIND^tm SOLUTIONS

PHOTOFIND^tm solutions are designed to enhance professional photography services on cruise ships, theme parks, etc. A PHOTOFIND^tm Manager appliance is available to automatically enroll images taken using digital cameras including finding the faces in each photo and controlling of the finding and delivery of photos. The PHOTOFIND^tm Manager uses bespoke face recognition to automatically locate and display photos from a database controlled by the PHOTOFIND^tm Manager with persons presenting themselves at the Enhanced Service Delivery Kiosk.

APPLICATION USES

Cryptometrics’ fingerprint biometric products offer solutions for secure access authentication, electronic transactions, secure communications, file encryption and data storage. Its information security products are designed to protect sensitive information on workstations, networks, and portable devices from unauthorized users, both internal and external.

Cryptometrics’ facial biometric products offer solutions for securing national borders and protecting the traveling public, the critical infrastructure of a country as well as supporting law enforcement, enhancing homeland security and the delivery of first responder support.

SOFTWARE/HARDWARE COMPATIBILITY

Cryptometrics’ fingerprint security solution integrates with advanced and commercially available biometric devices, elevating internet security to new levels. Cryptometrics’ software has been designed to maximize the technological capabilities built into a number of leading edge fingerprint biometric devices.

Cryptometrics’ facial security solutions are capable of working with many different platforms and are able to accept and use commercially available off-the-shelf face recognition software. They equally make use of commercial IT products such as desktop computers, servers, peripherals and software.

PROPRIETARY BIOMETRIC TECHNOLOGY

Cryptometrics’ fingerprint biometric technology is driven by FingerSURE^tm methodology, a method which combines convenience and extended levels of security including the manner in which sensitive personal security information is stored on a secure personal device that biometrically identifies the authentic user.

Cryptometrics’ facial biometric technology is underpinned by a family of proprietary hardware and software technology invented by Cryptometrics. The family of products is core face recognition which works with commercially available, off-the-shelf face recognition software packages.

Cryptometrics’ facial biometric technology includes software that:


	•	Automatically detects and locates faces in live video or in digitized images;

	•	Automatically identifies and locates the key landmarks of the human face, such as center of the eye sockets, tip of the nose and corners of the mouth;

	•	Automatically assesses the overall quality of a digital image of the face for suitability with commercial off-the-shelf face recognition software;

	•	Automatically crops the face to realize the best orientation of the image of the face for use with face recognition software;

	•	Automatically locates the key facial landmarks and turns (rotates) the face with limited distortion to a full frontal (forward looking) pose;

120


	•	Automatically simulates muscle movement and jaw rotation to realize an expression neutral pose of the face; for example close an open mouth;

	•	Uses sensor derived data such as range to target and angular location of target to automatically steer a pan, tilt and zoom camera to capture facial images of a targeted person;

	•	Uses face detection to locate and then track a person who’s facial image is being captured by a stationary camera;

	•	Preprocesses images of the face to improve, where possible, the performance of commercial off-the-shelf face recognition software; and

	•	Automates the business process of capturing and confirming ones facial biometric via face recognition software in such activities as issuing a official travel document, identification document, seeking entry to a country at a border check point.

Cryptometrics’ facial biometric technology includes hardware that:


	•	Derives samples of facial images from photographs for use with face recognition software;

	•	Utilizes smart camera systems designed to automatically capture facial images suitable for face recognition from persons in a defined field of view;

	•	Utilizes smart camera systems designed to automatically capture facial images simultaneously in a prescribed field of view;

	•	Utilizes self-service kiosks that incorporate face biometric capture and processing; and

	•	Utilizes computerized appliances that match a captured facial biometric against a database of biometric samples for the purpose of isolating those person(s) that look most like that person, or for the purpose of confirming that the person is who they claim to be.

Aspects of the software and hardware technology are embraced by patents in key countries such as the Europe Union, Canada, USA, New Zealand, Australia, China, Japan and the United Arab Emirates.

POTENTIAL MARKETS

The potential markets for Cryptometrics’ hardware and software products, and integrated solutions cover the following industries:

Identity Confirmation via Fingerprint Matching. This industry includes protection of computer based information technology systems and the information they handle, store and communicate in the fields of medical, health, government, educational and financial services. In many cases market demand is being driven by legislation, regulations or policies that are forcing greater protection associated with access to information held by computers. Examples of such legislation, regulations or policies are:


	•	Health Insurance Portability and Accountability Act. Purpose: To improve the portability while maintaining the privacy and security of patient information.

	•	Gramm-Leach-Bliley Act. Purpose: To protect the information financial institutions collect about customers.

	•	California Senate Bill 1386. Purpose: To give California consumers immediate notice of security compromises in computer systems so they can take action before identity theft occurs.

	•	Sarbanes-Oxley Act of 2002. Purpose: To restore investor confidence in the financial reporting of public companies and hold a company’s officers personally responsible for misrepresentation. Under the law, public companies must employ a third party to audit not only their financial statements, but also to verify the reasoning, policies and controls behind those statements. This means information technology departments must store and create access to all information including structured data like spreadsheets and databases, and unstructured data such as e-mail and instant messages relating to the company’s financial statement. Any

121


		public company is affected by the Sarbanes-Oxley Act of 2002 and experts recommend private companies hoping to go public or be acquired by a public company also should abide by the rules.


	•	The National Strategy to Secure Cyberspace. Purpose: To suggest best practices to the private sector for protecting critical infrastructures and businesses from cyber attacks.

Identity Confirmation via Facial Recognition. This industry includes: (i) identity in the presence of a claimed identity and/or confirming identity of a person in the absence of a claimed identity in such fields as travel and identification document issuance (e.g. driver’s license); (ii) border clearance; (iii) aviation security; (iv) critical infrastructure and key asset protection; (v) law enforcement; (vi) homeland defense; (vii) first responder support; and (viii) customer service and customer management. As with fingerprint, market demand for face is being driven by legislation and regulations that have been enacted in many countries to deal with the threat of terrorism, in addition to illegal migration, trafficking and smuggling of persons and identity theft. Examples of such legislation and regulations that specify deployment of face biometric checks are:


	•	USA Patriot Act. Purpose: To boost the government’s ability to track and prosecute terrorist activity through increased use of surveillance, information sharing and other means.

	•	U.S. Public Law 107-173 — Enhanced Border Security and Visa Entry Reform Act. Purpose: Use of biometrics (face being designated as the mandatory, globally interoperable biometric) in travel documents to support more secure border clearance. It states that not later than October 26, 2006, the government of each country that is designated to participate in the visa waiver program established under Section 217 of the Immigration and Nationality Act shall certify, as a condition for designation or continuation of that designation, that it has a program to issue to its nationals machine readable passports that are tamper resistant and incorporate biometric and document authentication identifiers that comply with applicable biometric and document identifying standards established by the United Nations International Civil Aviation Organization.

	•	European Union Regulation — Council Regulation 15152/04. Purpose: Update the standards governing passport security features for all twenty five (25) European Union member countries to include the integration of biometric identifiers into European Union passports and travel documents. The regulation sets out that at a minimum, all new European Union passports will have a storage medium containing a full facial image and fingerprints in interoperable formats, along with standardized biographical data. The purpose of the biometric identifiers is to offer protection against falsification of passports and better identification of passport holders. The Regulation sets a compliance date of 28 August 2006 for countries to commence issuance of the new European Union passport with facial image. Fingerprints are to be added within 18 months following that date.

In addition the UN’s International Civil Aviation Organization has agreed an International Standard governing Machine Readable passports, including the ePassport which contains a mandatory, globally interoperable face biometric. This Standard affects 189 countries. The legislation and regulations referenced above all cite the United Nations International Civil Aviation Organization Standard as the basis for biometric data compliance.

As the result of these regulations, policies and legislation, introduction of new International Standards, and the mounting threat deriving from terrorism, governments and private sector organizations worldwide are seeking ways to deliver enhanced levels of protection and security for their operations, their staff and the people they serve. The introduction of fingerprint and face technology specifically designed to address these very specific needs places Cryptometrics in a unique position to capitalize at a time of concentrated, world-wide implementation.

GENERAL DESCRIPTION OF CRYPTOMETRICS’ FINGERPRINT RECOGNITION OFFERINGS

Cryptometrics’ technology can be universally applied to any business or group of users seeking to control access, securely identify, transmit and store private or sensitive data and provide a safeguard solution to internet fraud. With Cryptometrics’ system, the possibility of an individual intercepting an email or gaining access to stored information has been mitigated. The answer is in the underlying software/hardware technology. All information in terms of authentication and personal data is strongly encrypted and securely stored. The secure storage of the information may be in a corporate directory, or if required on a cryptographically secure hardware. If a biometric

122

device is used that supports on device storage and matching of biometric information, then this information is never stored on or transmitted through the user’s workstation.

The banking industry and other financial services institutions that engage in check transactions, online credit card and debit transactions are continually seeking a tamper resistant system. The same principles apply to online gaming, auction and stock/security transactions. With the Cryptometrics solution, the private key is secured with a biometric authentication, and is used in conjunction with a cryptographic device, can be generated and stored in the self-contained device. Therefore, information is always secure and is virtually tamper proof during transfer and storage. Cryptometrics believes that its system can be used globally for all industries online and offline transactions.

GENERAL DESCRIPTION OF CRYPTOMETRICS’ FACIAL BIOMETRIC OFFERINGS

Cryptometrics operates in the rapidly expanding market for face biometric solutions specifically designed to support travel document issuance, border clearance and homeland security and public safety. The following unique competencies and experiences combine to establish and underpin the uniqueness of Cryptometrics’ Facial Biometric offerings,

STRONG APPLICATION EXPERIENCE AND KNOWLEDGE

Cryptometrics senior staff has over 100 years of experience in creating solutions for travel document issuance. For instance, Cryptometrics senior staff has developed quality assurance readers for machine readable passports, passport book printers, and passport issuance software. Cryptometrics senior staff has also developed solutions for border clearance, including the first passport/travel document readers. This experience and knowledge allows Cryptometrics to anticipate the best face biometric solutions, and create each in a way that best fits those special needs that are travel document issuance and border clearance.

GLOBAL PURVIEW

Cryptometrics has a special global purview on requirements for machine assisted identity confirmation systems for supporting travel document issuance and border clearance. The Chief Strategy Officer of Cryptometrics, Joel F. Shaw, is the Chairman of the Working Group established by the International Standards Organization to prepare International Standards for Machine Readable Travel Documents. This work is carried out collaboratively between the International Standards Organization and the UN’s International Civil Aviation Organization. Mr. Shaw has held this position since 1989.

NEW BREED OF FACE RECOGNITION PROVIDER

Cryptometrics represents a new breed of face biometric solution provider that designs, develops and contributes critical technology that enables commercial off-the-shelf face recognition software to perform better. Cryptometrics has created this suite of enabling technologies; i.e. hardware and software technology — ranging from smart face biometric cameras, to kiosks, to photo enrolment units, to fusion technology, to a fully scalable IT solution architecture — to realize the best overall performance for any of the commercial off-the-shelf face recognition software packages.

By combining these enabling technologies with special application products designed to support travel document issuance and border clearance, end to end solutions are realized that produce an overall enhanced level of identification performance.

FULLY SCALABLE INFORMATION TECHNOLOGY

Cryptometrics has created a fully scalable, information technology capable of working with many different software platforms that can support the various process steps involved in delivering and operating small to large scale face recognition solutions.

123

EXPERIENCE WITH PASSPORT ISSUANCE AUTHORITIES

While working for passport issuing authorities, Cryptometrics successfully achieved a back record conversion of existing photographs or image databases, converting these national assets into valued contributors to urgent homeland security solutions. It has recently extended that expertise, applying it to convert and use law enforcement photo image databases with face recognition technology.

Cryptometrics has created advanced Search Engine technology that has been used to perform highly accurate fraud searches in support of passport issuance; i.e. fraud searches that search the entire collection of images without having to resort to “bogus performance enhancing techniques” such as biographical filters and binning.

TECHNOLOGY ENABLES MIGRATION BETWEEN 2-D AND 3-D FACE RECOGNITION

Cryptometrics has also developed technology to allow migration between 3-D and 2-D recognition:


	•	Technology to detect the 3-D orientation of the face from a photograph or image and use this information to digitally turn the face without distortion to the more optimum face recognition preferred “full frontal pose”. The technology can also be used to create a series of “derivative images “capable of forming a 3-D facial profile.

	•	Technology capable of digitally replicating muscle and jaw movement in the face to allow a facial image to be cleared of performance reducing gestures (e.g. smile, frown and mouth open), thereby assuming the more optimum, face recognition preferred “gesture neutral pose”. The technology can also be used to create “derivative images containing specific gestures” to improve match checks.

These unique competencies and experiences have allowed Cryptometrics to develop facial biometric capture devices and integrated systems that do not require a person to be cooperative — from single and multiple person over the counter capture and identification solutions to solutions able to seek out and capture a person’s facial biometric (in the form of an image) at upwards of 75 feet. They have lead to the creation of a range of unique preprocessing and image enhancement/handling software that allow commercial off-the-shelf face recognition software to realize better performance overall than if simply used on their own to process new live capture images, photos or images reclaimed from a historical database. They have also ensured that Cryptometrics is able to offer turn-key systems to address travel documents, border security, aviation security, homeland defense and critical infrastructure protection as a first step, thus placing Cryptometrics in a position of being able to meet market demands at the time of greatest need.

OTHER APPLICATIONS

Cryptometrics will continue to market research and pilot implementations of its technology and integrated solutions across a number of vertical markets; for example, the application of face biometrics to realize an enhanced level of trusted customer service from a self-service kiosk. In 2005 Cryptometrics successfully introduced and pilot tested face biometrically enabled kiosks on cruise ships to enhance the delivery of professional photo services to passengers. This successful experiment has opened up a completely new vertical market for Cryptometrics with significant potential for revenue realization. It equally confirms the potential of applying the technology to a range to applications outside of the security field. Market research is on going to determine how the technology can be applied to banking for the purpose of mitigating fraud and identity theft.

EXISTING CLIENTS — FACIAL RECOGNITION

Cryptometrics has provided technology and/or services to a number of governments and private sector organizations, some of which are as follows:


	•	New Zealand Passport Office — Cryptometrics (i) carried out an investigation into the potential of using their 2.5 million record passport photo database with face recognition technology; (ii) successfully converted the existing database and pilot tested using a number of key face recognition software packages; (iii) developed and pilot tested a prototype passport applicant identity confirmation system for supporting

124


		passport issuance; (iv) designed and delivered a photo image quality assessment system for live passport issuance; and (v) designed and delivered a facial image Lookout system for live passport issuance.


	•	UK passport Agency — Cryptometrics was retained on several occasions to assist the UK passport Agency as it moves towards issuance of the new British ePassport. To date Cryptometrics has (i) evaluated existing scanning equipment used to digitize passport photos to determine overall suitability for use in issuing the ePassport; (ii) recommended replacement scanning equipment and evaluated overall suitability for use in issuing the ePassport; (iii) evaluated the historical database of passport photos to determine potential suitability for use in confirming identity of applicants using face recognition; and (iv) assisted in the evaluation of vendors of passport photos and providing recommendations on suitability for use with face recognition technology.


	•	Foreign and Commonwealth Office — Cryptometrics has assessed alternate facial image processing and capture processes to meet the requirements for optimal face recognition in the foreign missions. These are used for both passports and visas.

	•	German Federal Criminal Police — Cryptometrics has delivered turnkey systems used to test face recognition to confirm the identity of a travel document presenter for potential use in Germany’s border control.

	•	Netherlands Ministry of the Interior and Kingdom Relations — Cryptometrics has delivered turnkey systems used to test face recognition and fingerprint matching for confirming the identity of a travel document presenter. In addition to countertop placement configurations, Cryptometrics created and delivered self-service kiosk based units.

	•	US ARMY/Special Operations Command Cryptometrics has delivered facial biometric systems that include smart biometric cameras, photo enrollment stations and face recognition controllers.

	•	US DEPARTMENT OF HOMELAND SECURITY — Cryptometrics designed, developed and delivered a prototype face biometric capture and processing system for Baltimore-Washington Airport.

	•	Australia — Cryptometrics participated in a trial for a police force organization (unnamed under non-disclosure understanding) to determine the effectiveness of face recognition for identification in surveillance applications. This was a trial involving the leading biometric provider and integrator companies’ world-wide. The conclusion of this trial independently proved that Cryptometrics performance for indoorr surveillance applications was found to be the best in the world.

	•	African Country: National Information and Security System — Cryptometrics conducted a photo image quality evaluation and duplicate check (1 to Many Fraud check) test on 150,000 image subset of their existing passport image database. The objective of this effort was to determine the suitability of face recognition technology when using existing legacy databases. Cryptometrics technology was found to be the best performing technology system and accurate enough to be used with the existing national database set of facial images.

	•	Portugal — SEF (Passport Issuance Authority) — Cryptometrics designed, developed and provided the biometric capture subsystems used in free-standing kiosks that captured face image, two fingerprints (two index fingers), signature and biographical information.

	•	Portugal — MFA (Ministry of Foreign Affairs) — Cryptometrics designed, developed and provided the biometric capture subsystems used in free-standing kiosks that captured face image, all ten fingerprints of both hands, signature and biographical information.

	•	LifeTouch National School Studios Inc. — Cryptometrics licenses products to this customer for facial biometric face finding, and eye location and landmark detection and coordinates for further processing millions of portrait and group photos. This provides greater accuracy and efficiencies to a manual labor intensive process.

	•	New York, Westchester County Government — The County Government requires greater security and controls of sensitive documentation that is provided to the Government, processed internally and shuttled

125


		within its infrastructure. The Cryptometrics FingerSure Enterprise product along with a completely integrated and portable biometric capture device has been licensed and deployed to support these needs.


	•	Cryptometrics has deployed face recognition based verification and identification systems for police, military and security organizations in Thailand, Poland, Czech Republic, Japan, Singapore, Malaysia, Philippines, Australia and the US including the Department of Defense.

In addition Cryptometrics has provided face biometric kiosks for capturing the facial biometric from passengers aboard a cruise ship and then returning photos that had been taken of them while on the cruise. The kiosk is the passenger interface into a completely automated retrieval and procurement system being tested for potential fleet wide use.

Cryptometrics has also supplied face biometric training systems to special military forces, each containing a number of Cryptometrics advanced face recognition capture and processing devices and appliances.

STRATEGIC ALLIANCES AND PARTNERSHIP PROGRAM

SOLUTION INTEGRATOR PARTNERS

The objective of the Solution Integrator program is to provide core Cryptometrics biometric software and hardware technology to organizations providing solutions that use embedded biometric technology. Such organizations offer turn key solutions that serve a particular market or application area in which machine assisted identity (biometric) confirmation is required, or of value if added within a solution they are delivering to a client. The Solution Integrator will gain value in partnering with Cryptometrics by delivering a more complete solution for their respective clients, and providing a unique competitive advantage to the Solution Integrator.

RESELLER PARTNERS

The objective of the Reseller Partner Program is to establish a network of qualified and skilled resellers that will promote and sell the Cryptometrics offerings. Cryptometrics works cooperatively with each reseller partner in order to establish effective skills transfer and sales effort.

SOURCES OF REVENUE

Currently Cryptometrics’ established source of revenue is derived from software/hardware purchase agreements, consulting contracts, license agreements of its base product and supporting technologies. Residual revenue will come from maintenance upgrades and services for new options developed. As an example, although the predominance of the revenue in fiscal 2007 was attributable to the sale of software and hardware to one customer on a one-time basis, Cryptometrics has continued to generate revenue, although relatively minor, from follow-on type applications sold to such customer. Other revenue sources will come from joint development projects with special client requirements or with other equipment and device manufacturers. These successful joint development projects can lead to licensing agreements for private labeling and joint venture opportunities to license its solutions for a fixed term with renewal options. A potential source of revenue is consultative services to implement Cryptometrics’ packaged solution offering.

Cryptometrics believes that its Cryptometrics Partner program has the potential to generate revenue and margin for growth. This program involves a significant up front sales and development effort, some of which should be funded by the partner but once channeled and established it could become a recurring revenue stream with relatively low overhead cost for new sales. Once the development effort is complete and a partnership established, most customer related selling activities would be expected to come from the partner, thereby increasing Cryptometrics’ representation in the market place in terms of introductions to potential customers. Thus, this channel quickly becomes a very predictable, repeatable and high profit margin channel.

126

ADVERTISING, SALES & MARKETING PROMOTION

Cryptometrics intends to target use print media to describe its services, while continuing to participate in trade shows and other similar industry conferences. It will also continue to refine its Web Site and to develop brochures and various promotional material targeted to specific markets and opportunities.

Cryptometrics has entered into a contract with a public relations firm to increase its exposure to the public. This has already produced results, with segments aired on CNN news highlighting the Cryptometrics facial recognition solution and a number of articles and interviews highlighting the Cryptometrics FingerSURE solution.

Based upon various referrals, Cryptometrics believes that the features of its offerings are becoming known and the status of its senior team in the industry is being recognized.

COMPETITION

There are many companies presently offering identification and authentication hardware/software packages such as Identix, Viisage, Cogent and Cognitec, ActivIdentity and BNX Systems Corp. Many of the large enterprise and governments are aggressively seeking security solutions to combat internet fraud, data intrusion, unauthorized network access, and physical perimeter security breaches. The current market place for this type of technology is well defined and funded. Current technology addresses these concerns and minimizes the enterprise and government’s exposure to monetary fraud and unauthorized access. Cryptometrics attempts to distinguish itself from its competition by offering to both the customer and the client, the security/authentication system that provides a very high assurance that an intruder cannot access or physically breach the protected asset. Cryptometrics also stresses the versatility of its products through its capability of working with may different software platforms.

Cryptometrics has entered into a partnership with a fingerprint device manufacturer to deliver the fingerprint authentication solutions. The device provides wireless, on-device verification of the fingerprint. Cryptometrics FingerSURE^tm software leverages the device to provide its customers a robust and amply featured wireless logical access and authentication solution for their information systems. To help our customers better understand what we do, the following information is provided. For protection of critical corporate data, The FingerSURE^tm product delivers the highest level of data and information asset security in the industry at the user and enterprise level. A unique technology leadership capability is the FingerSURE^tm movement of a private key or digital identity certificate to a trusted biometric device or trusted platform module. This private key can also be associated with the Microsoft Encrypting File System encryption routine provided as part of the Microsoft Windows platform and most important, the private key can only be used to decrypt data or access systems once a successful biometric authentication takes place”.

The majority of Cryptometrics’ competitors presently offer a closed and proprietary system for sale to the client. These systems are based on supporting only the technology that the company sells, and does not offer the client the flexibility and the additional strengths of being agnostic. Cryptometrics hardware/software strategy allows Cryptometrics to provide the most robust and feature rich solution possible. The capability of working with many different software platforms has allowed Cryptometrics to become the vendor of choice for large domestic and international government agencies. The ability to support multiple types of technologies and biometric algorithms has allowed Cryptometrics to create the support of a new type of biometric identification known as fusion technology. This fusion technology allows the support of already deployed biometric systems to be further enhanced and improved with the addition of Cryptometrics technology.

Cryptometrics is looking to secure all the logical and physical points of access to the enterprise, from the employee’s login at their enterprise desktop, to remotely connecting from home through a biometrically secured network, to physical access to the enterprise premises. Cryptometrics offers support for biometric authentication on a biometric device itself, or through a centrally controlled and administered authentication server. Both options allow clients the highest level of biometric security and authentication. Cryptometrics’ technology is based on developing software/hardware applications which drive and fully exploit biometric recognition technologies.

127

CRYPTOMETRICS’ MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF CRYPTOMETRICS FOR THE FISCAL YEARS ENDED APRIL 30, 2007 (AS RESTATED) AND 2006 AND THE SIX MONTHS ENDED OCTOBER 31, 2007 AND 2006

INTRODUCTION

This Management’s Discussion and Analysis of the Financial Condition and Results of Operations of Cryptometrics contains forward-looking statements that are based on current expectations, estimates, and projection about Cryptometrics and the industries in which Cryptometrics operate. In addition, other written or oral statements which constitute forward-looking statements may be made by or on behalf of Cryptometrics. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” or variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performances and involve certain risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Cryptometrics undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, other than as required by law.

Potential risks and uncertainties include, without limitation, the uncertainties inherent in the development of new products, Cryptometrics’ need for additional funding, the uncertain market acceptance of our products, the uncertainties inherent in managing the integration of acquired businesses, and rapid developments in technology, including developments by competitors. Cryptometrics operates in a very competitive and rapidly changing environment. Cryptometrics has often relied on one or two major customers per year for most of its revenues and, as these are not repeat customers, it must regularly find new major customers. New risks can arise and it is not possible for management to predict all such risks, nor can it assess the impact of all such risks on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

Overview

Cryptometrics is a provider of biometric solutions for critical infrastructure and key asset protection. Cryptometrics provides both hardware and software solutions focusing on biometric identification and verification both domestically and internationally. The FingerSURE product line provides encryption software, allowing users of both trusted and non-trusted authentication devices the ability to, in a secure manner to verify identity via a finger print. The SecurIDent product line contains proprietary software products/solutions that possess image quality analysis, eye finding logic, image normalization and matching. From a hardware prospective Cryptometrics provides its various biometric smart cameras utilizing off the shelf casings, sensors and lens; configured utilizing intellectual property and providing live capture images that are suitable for facial recognition. This technology is applied and utilized by Border Patrols, Immigration Authorities, and various governmental and non-governmental agencies.

Cryptometrics was incorporated in the State of Delaware in May 2000 under the name Postal Hut, Inc. In November 2001, Cryptometrics changed its name to Cryptometrics, Inc.

Acquisitions

In March 2004, Cryptometrics acquired all of the outstanding shares of Cryptometrics Canada, Inc. (formerly known as Biodentity Systems Corporation), a Canadian company specializing in providing next generation face biometric authentication technologies and solutions specifically designed to strengthen border control, aviation security and homeland defense. Cryptometrics’ SecurIDent and IDPASS solutions are used to secure the issuance of passports and a wide range of national documents and critical infrastructure.

Critical Accounting Policies

Management discussion addresses Crytpometrics’ consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation

128

of these statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenue and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgment, including those related to revenue recognition, goodwill, bad debts, income taxes, and contingent liabilities. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments as to the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions.

The Securities and Exchange Commission (“SEC”) defines “critical accounting policies” as those that require application of management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.

The following discussion of critical accounting policies represents Cryptometrics’ attempt to report on those accounting policies which Cryptometrics believes are critical to its consolidated financial statements and other financial disclosure. The following discussion is not intended to be a comprehensive list of all of Cryptometrics’ significant accounting policies, which are more fully described in the Notes to the Consolidated Financial Statements included in this report. The following is a summary of Cryptometrics’ critical accounting policies and estimates.

Revenue Recognition

Significant management judgments and estimates are made in connection with the revenues recognized in any accounting period. Cryptometrics must assess whether the fee associated with a revenue transaction is fixed or determinable and whether or not collection is probable. Material differences could result in the amount and timing of revenues for any period if management were to make different judgments or utilize different estimates.

Certain of the Cryptometric’ equipment sales such as its’ SecurIDent Systems generally require installation subsequent to shipment and transfer of title. Cryptometrics recognizes revenue on such sales in accordance with Staff Accounting Bulletin (“SAB”) 104, “Revenue Recognition”.

Revenue related to equipment sales that are contingent on installation is deferred until installation is complete, title has transferred and customer acceptance has been obtained. Due to Cryptometrics’ current policy and practices, it considers acceptance of the SecurIDent Systems contingent upon successful installation of the product. Revenues from sales of products via authorized representatives, dealers, distributors or other third party sales channels are recognized at the time of title transfer, generally upon shipment.

Cryptometrics also sells several stand-alone software products including Face Recognition server, Face Processor and software developer kits. Revenue is recognized on software products in accordance with Statement of Position (“SOP”) 97-2, “Software Revenue Recognition,” as amended. Cryptometrics recognizes revenue on software products when persuasive evidence of an arrangement exists, delivery has occurred, the vendor’s fee is fixed or determinable and vendor-specific objective evidence (“VSOE”) of fair value exists to allocate the total fee to all undelivered elements of the arrangement and collection is deemed reasonably assured. VSOE of fair value is established based upon either sales of the element (e.g, maintenance, training or consulting) in individual transactions, or, in certain cases for maintenance, based upon substantive renewal rates. In cases where Cryptometrics does not have VSOE of fair value for all delivered elements in the transaction (e.g., for licenses), the fees from these multiple-element agreements are allocated using the residual value method. In circumstances when the software and services being sold include services to provide significant production, modification or customization of the software, and the services cannot be segregated into separate units of accounting, Cryptometrics accounts for the software sales under SOP 97-2 and SOP 81-1 “Accounting for performance of construction-type and certain production-type contracts”. In the cases where SOP 81-1 is applied, Cryptometrics uses the cost-to-cost method of percentage of completion. Under this method, sales, including estimated earned fees or profits, are recorded based on the percentage that total costs incurred bear to total estimated costs. Maintenance revenue is deferred and recognized ratably over the life of the service period of the related agreement.

129

Cash and Cash Equivalents and Short-term Investments

Cash and cash equivalents include all cash balances on hand and short-term, highly liquid investments with original maturities of three months or less. Short-term investments are highly liquid marketable securities with maturities of greater then three months but less then one year. The market value of the short-term investments is essentially the same as cost, therefore Cryptometrics has not recorded any unrealized gains or losses on these investments.

Income Taxes

Deferred Tax Assets — As required by SFAS No. 109, Accounting for Income Taxes, Cryptometrics recognizes deferred tax assets on its consolidated balance sheet if it is “more likely than not” that the subject net operating loss carry forwards and unused tax credits will be realized on future federal income tax returns. At April 30, 2007, Cryptometrics continued to provide a full valuation allowance against accumulated U.S. deferred tax assets reflecting Cryptometrics’ historical losses and the uncertainty of future taxable income.

If Cryptometrics begins to generate taxable income in a future period or if the facts and circumstances on which its estimates and assumptions are based were to change, thereby impacting the likelihood of realizing the deferred tax assets, judgment would have to be applied in determining the amount of valuation allowance no longer required. Reversal of all or a part of this valuation allowance could have a significant positive impact on operating results in the period that it becomes more likely than not that certain of Cryptometrics’ deferred tax assets will be realized.

Goodwill and Other Long-Lived Assets

In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, “Business Combinations”, and No. 142, “Goodwill and Other Intangible Assets”, effective for fiscal years beginning after December 15, 2001. Under the rules, the pooling of interests method of accounting for acquisitions is no longer allowed and goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with the Statements.

Cryptometrics’ goodwill arose from its purchase of the common stock of Biodentity and totaled $10,500,000. During the fiscal year ended April 30, 2005, Cryptometrics incurred additional costs totaling $200,000 which have been added to the goodwill. Upon acquisition and at the years ended April 30, 2007 and 2006, Cryptometrics performed its required tests for impairment and has determined there to be no impairment on each of those dates.

RESULTS OF OPERATIONS

Fiscal Years Ended April 30, 2007 (as restated) and 2006

Revenues

Revenues for fiscal year ended April 30, 2007 were $1,293,843, an increase of $1,078,182 or 500% as compared to $215,661 for the same period in the prior year.

Cryptometrics’ revenues in fiscal 2006 primarily consisted of two solution applications with the SecurIDent (facial) Systems product line, one for $120,000 (a software product) and the second for $82,000 (software development services). The remaining revenues of approximately $14,000 were also related to solution type applications.

Cryptometrics’ revenues for fiscal 2007 were generated from sales of its SecurIDent (facial recognition) Systems of approximately $734,000 and its FingerSure (finger imaging) Systems of some $560,000.

The increase in revenues in the fiscal year 2007 of $1,078,000 was attributed to its FingerSure Systems ($551,000) and its SecurIDent Systems ($527,000).

The predominance of the revenues in 2007 was attributable to one customer which comprised both FingerSure (finger imaging) and SecurIDent (facial imaging) product lines. These sales consisted of both software application solutions and hardware devices. The hardware component of the revenue was comprised of finger imaging devices

130

and live enrolment cameras and accounted for approximately 75% of the total revenue associated with this customer. This customer’s purchases in fiscal 2007 were predominately a one time event. With the exception of anticipated minor revenue contributions associated with limited follow-up applications in the fiscal year ended April 30, 2008, Cryptometrics does not anticipate further major revenue contributions from such customer. As a consequence, Cryptometrics has begun to aggressively focus its ability to generate future and on-going business opportunities in the international arena, especially in certain areas of the Middle East.

Cost and expenses

Cost of revenues were $818,808 for the fiscal year ended April 30, 2007, compared to $59,278 for the same period in the prior year, representing an increase of $759,530 or 1280%. The costs represent 63% of revenue, compared to 27% of revenue for the prior period.

The increase, as a percentage of total revenue, was due to the current period being primarily comprised of lower margin hardware sales (such as finger imaging devices, live enrolment cameras, and certain identity controller mechanisms) which accounted for approximately 75% of total revenue. In addition, the revenue associated with the software and solutions portion experienced lower margins due to the competitive bidding associated with the government tender process of the project. The revenues in fiscal 2006 were software and solutions applications, not subject to competitive bidding and thus resulted in higher margins.

Research and Development Expenses

Research and development expenditures consists largely of salaries for technical personnel, the cost of related engineering materials, software tools and support, outside sourced products, project expenses and related third party consulting costs.

Research and development expense for the fiscal years ended April 30, 2007 and 2006 were $3,589,008 and $2,181,936, respectively.

Research and development expenses increased due to the use of specialized outside sourced product development for a specific type of application, as well as increases in materials and somewhat lower R & D credits in 2007 as compared to 2006.

Outside product development was utilized in 2007 for the development of an application system specific to Critical Infrastructure Protection. The outside product development organization built upon very specific CryptoMetrics provided modules that were developed internally by Cryptometrics Research and Development and Engineering personnel. This method of development allowed Cryptometrics to rapidly deploy and make available to the market a turn-key product in a very economical and accelerated fashion.

Cryptometrics utilizes internal engineering resources to develop core and critical hardware and software elements. Based on this critical nature of product element, Cryptometrics maintains critical elements internal to ensure intellectual property retention. Consequently, the level of outside R&D is utilized on an as needed basis.

Outside Services also have been utilized by Cryptometrics for product development such as product certification, Hardware analysis (such as thermal analysis, industrial design, etc.) is not a core engineering specialty to Cryptometrics. Such practices are commonplace to most organizations and found to be the most economical with the highest degree of success.

General and Administration Expenses

General and administration expenses consist of salaries and related personnel costs for executive, financial and administrative functions, office and facilities expense, and professional fees.

General and Administrative expenses for the fiscal year ended April 30, 2007 increased $823,073 or 32% to $3,427,541 compared to $2,604,468 for the same period in 2006.

The increase was due to an increase in outside professional services of approximately $500 thousand (primarily related to the proposed merger with JAG Media), as well as increases in depreciation ($60 thousand),

131

insurance ($20 thousand), the recognition of bad debt ($100 thousand), increases in travel and living associated with the Middle East and other international destinations, and slight increases in wages.

Selling and Marketing

Selling and marketing expenses primarily relate to remuneration of sales personnel, and costs for bid proposals and demonstrations. Other significant cost components include advertising and conference/trade show costs for marketing activities and sales force travel costs.

Selling and marketing expenses for the fiscal year ended April 30, 2007 increased $189,706 or 7% to $2,896,502 compared to $2,706,796 for the same period in 2006.

The increase was primarily the result of an expansion of marketing and the utilization of outside consultants in conjunction with the Company’s aggressive focus, demonstrations, and competitive testing in certain regions of the Middle East.

Convertible Debenture Expenses

In October 2006, the Company closed a private placement through the issuance of a $12,000,000 convertible debenture. Cryptometrics had originally recorded the debt as a conventional convertible debt. Subsequently, Cryptometrics determined that embedded derivatives within the convertible debenture agreement should be reported as embedded derivatives pursuant to FASB statement No. 133, “Accounting for Derivate Instruments and Hedging Activities,” and Cryptometrics has additionally determined that these derivatives do not meet the requirements for treatment of the derivatives as equity instruments. Accordingly, Cryptometrics has recorded a derivative liability of $3,190,006 at April 30, 2007.

As part of the private placement, Cryptometrics agreed to issue warrants and a beneficial conversion feature. These warrants and conversion feature have been reported as part of the derivative liability. These embedded derivatives are revalued each reporting period and any gain or loss included in the Statement of Operations. For the year ended April 30, 2007, Cryptometrics recorded a gain on these derivatives of $19,944. See Notes 2 and 12 to the Consolidated Financial Statements.

In addition and in association with this private placement, Cryptometrics recorded deferred finance costs totaling $930,931. Amortization of these costs during the year ended April 30, 2007 total $336,170. The remaining deferred finance fees of $594.761 are currently classified as a current asset and will be fully amortized during the fiscal year ended April 30, 2008.

Interest and Other Income (Net)

Interest income in the fiscal year ended April 30, 2007 was a net $177,798 and consisted of interest income of $539,576 and interest expenses of $361,778 associated with interest on the convertible debenture. For the fiscal year ended April 2006, interest income was $406,836.

Interest income reflects principally investment income on funds the Company maintains in banks and other short-term investments.

Income Taxes

Cryptometrics is in a net deferred tax asset position and has generated net operating losses to date. No provision for or benefit from income taxes has been recorded in the accompanying statements of operations. Cryptometrics will continue to provide a full valuation allowance for its deferred tax assets until it becomes more likely than not, in management’s assessment, that the Cryptometrics’ deferred tax assets will be realized.

Net Loss

As a result of the factors described above, the net loss for the fiscal year ended April 30, 2007 was $9,593,733 which represent an increased loss of $2,663,752 or 38% as compared to the net loss of $6,929,981 for the same period of the prior year.

132

LIQUIDITY AND CAPITAL RESOURCES

At April 30, 2007, Cryptometrics had cash, cash equivalents and short-term investments of $11,575,615 and negative working capital of $283,034, as compared to cash, cash equivalent and short-term investments of $10,664,737 and working capital of $9,837,211 at April 30, 2006.

The difference in working capital at April 30, 2007, when compared to April 30, 2006 is attributable primarily to the losses sustained in fiscal 2007 and the classification, as current liabilities, the value of the convertible debenture and the associated derivative liability offset somewhat by the inclusion, in current assets, of the remaining net proceeds from the sale of the convertible debenture.

Cash flows for the fiscal periods were as follows:


	Year Ended April 30, 2007			Year Ended April 30, 2006
	(Audited and as Restated)			(Audited)

Cash flows used in operating activities	$	(9,309,336	)	$	(6,970,870	)
Cash flows used in investing activities	$	(551,291	)	$	(3,697,930	)
Cash flows from financing activities	$	11,174,069		$	6,908,800
Net effect of currency fluctuations	$	120,451		$	97,909

Net change in cash and cash equivalents	$	1,433,893		$	(3,662,091	)

Cryptometrics used $9,309,336 in operating activities for the fiscal year ended April 30, 2007 as compared to $6,970,870 in the same period in 2006. The increase in cash used in operations is attributed primarily to the net loss for the respective periods.

Cash used in investing activities during the fiscal year ended April 30, 2007 was a net $551,291 as compared to the use of $3,697,930 for the same period in the previous year. Cash used in investing activities amounted to approximately $1,075,000 and consisted of the acquisition of fixed assets ($306,000), patent and trademark application costs ($193,000) and, advance of ($575,000) associated with a related party transaction which is described in the Notes of the Consolidated Financial Statements. Cash provided by investing activities was approximately $523, 000 from the net sale of short-term marketable securities.

Cash provided from financing activities of $11,174,069 was primarily attributable to the net proceeds from the issuance of a convertible debenture, which is described in the Notes to the Consolidated Financial Statements.

Cryptometrics does not have a bank credit facility or other working capital credit line under which it may borrow funds.

Future liquidity and cash requirements will depend on a wide range of factors including the level of business in existing and future operations and Cryptometrics’ ability to raise additional financing.

The following is a summary of Cryptometrics’ non-cancellable operating leases for the periods indicated that existed as of April 30, 2007 and is based on information appearing in the Notes to the Consolidated Financial Statements:


Operating lease obligations	$

2008		150,765
2009		154,629
2010		159,690
2011		13,342

	$	478,426

133

RESULTS OF OPERATIONS

Fiscal Six Months Ended October 31, 2007 and 2006

Revenues

Revenues for fiscal six months ended October 31, 2007 were $71,742 as compared to $979,127 for the same period in the prior year.

For the six months ended October 31, 2006, approximately 85% of the six months revenue of $979,127 was attributed to one customer and the split was 53% related to the SecurIDent (facial) product line and 47% related to the FingerSure (finger imaging) product line and consisted of both software application solutions and hardware devices. The remaining 15% of revenue basically was for minor software solution for specific government and non-government applications.

Revenue for the six months ended October 31, 2007 was $71,742 and the predominance related to follow-on applications for the one customer mentioned above.

During the six months ended October 31, 2007 Cryptometrics had been requested to submit tender bids on various security oriented projects in certain areas of the Middle East. Cryptometrics has recently been notified of its award, as prime contractor, on one such project. However, the terms, conditions, values and contract duration have as yet to be firmly established in a definitive contract. Consequently, Cryptometrics believes that the revenues in the six months ended October 31, 2007 do not reflect the revenue run rate for the fiscal year ended April 30, 2008.

Cost and expenses

Cost of revenues were $44,630 for the six months ended October 31, 2007, compared to $607,818 for the same period in the prior year. The costs represent 62% of revenue, compared to 62% of revenue for the prior period. Although the difference in cost, as a percent of revenue, when comparing the quarters of 2007 to the quarters of 2006 was driven by the product mix and the split between both hardware devices and software solution applications, the mix and split for the six months have basically averaged out, as a percent of revenue.

Research and Development Expenses

Research and development expense for the six months ended October 31, 2007 and 2006 were $1,186,634 and $1,833,415, respectively.

Research and development expenses decreased $646,781 or 35% due to the lower utilization of specialized outside sourced product development and higher R & D credits in 2007 as compared to 2006.

Outside Services are utilized by Cryptometrics for product development such as product certification; hardware analysis (such as thermal analysis, industrial design, etc.) which is not a core engineering specialty to Cryptometrics. Such practices are commonplace to most organizations and found to be the most economical with the highest degree of success.

General and Administrative Expenses

General and administrative expenses consist of salaries and related personnel costs for executive, financial and administrative functions, office and facilities expense, and professional fees.

General and Administrative expenses for the six months ended October 31, 2007 increased $211,407 or 14% to $1,671,567 compared to $1,460,160 for the same period in 2006.

134

The increase was primarily due to outside professional services (related to the proposed merger with JAG Media Holdings), offset in part by net decreases in travel and living expenses associated with the Middle East and other international destinations when compared to 2006.

Selling and Marketing

Selling and marketing expenses primarily relate to remuneration of sales personnel, outside sources, consultants and costs for bid proposals and demonstrations. Other significant cost components include advertising and conference/trade show costs for marketing activities and sales force travel costs.

Selling and marketing expenses for the six months ended October 31, 2007 increased $436,286 or 33% to $1,743,088 compared to $1,306,802 for the same period in 2006.

The increase was primarily the result of higher costs for bid proposals and demonstrations in the Middle East, utilization of outside sources and consultants and travel and living expenses associated with the sales efforts, primarily in the Middle East.

Convertible Debenture Expenses

In October 2006, Cryptometrics closed a private placement through the issuance of a $12,000,000 convertible debenture. Cryptometrics had previously recorded the debt as a conventional convertible debt. Subsequently, Cryptometrics has determined that embedded derivatives within the convertible debenture agreement should be reported as embedded derivatives pursuant to FASB statement No 133, “Accounting for derivative Instruments and Hedging Activities”, and Cryptometrics has additionally determined that these embedded derivatives do not meet the requirements for treatment of the derivatives as equity instruments. Accordingly, Cryptometrics has recorded a derivative liability of $3,163,191 at October 31, 2007.

As part of the private placement, Cryptometrics agreed to issue warrants and a beneficial conversion feature. These warrants and conversion feature have been reported as part of the derivative liability. These embedded derivatives are revalued each reporting period and any gain or loss included in the Statement of Operations. For the six months ended October 31, 2007, Cryptometrics recorded a gain on these derivatives of $26,815.

In addition and in association with this private placement, Cryptometrics recorded deferred finance costs totaling $930,931. Amortization of these costs during the six months ended October 31, 2007 totaled $310,310. The remaining deferred finance fees of $284,451 are currently classified as a current asset and will be fully amortized during the fiscal year ended April 30, 2008.

Interest and Other Income (Net)

Interest in the six months ended October 31, 2007 was a net expense of $383,895 and consisted of interest income of $178,440 and interest expense of $562,335 primarily associated with interest on the convertible debenture. For the six months ended October 31 2006, interest income was $150,689 and interest expenses of $71,298 for a net income of $79,391.

Interest income reflects principally investment income on funds Cryptometrics maintains in banks and other short-term investments.

Income Taxes

135

Net Loss

As a result of the factors described above, the net loss for the six months ended October 31, 2007 was $5,250,396, which represents an increased loss of $1,100,719 or 26% as compared to the net loss of $4,149,677 for the same period of the prior year.

LIQUIDITY AND CAPITAL RESOURCES

At October 31, 2007, Cryptometrics had cash, cash equivalents and short-term investments of $5,162,579 and negative working capital of $8,487,933, as compared to cash, cash equivalent and short-term investments of $11,575,615 and negative working capital of $283,034 at April 30, 2007.

The changes in the levels of cash and working capital at October 31, 2007, when compared to April 30, 2007 is attributable primarily to two factors: the net loss sustained in the six months ended October 31, 2007 and advances of $3,055,184 in the six months ended October 31, 2007 associated with the related party transaction which is described in the Notes to the Consolidated Financial Statements.

Cash flows for the fiscal periods were as follows:


	Six Months Ended
	October 31, 2007			October 31, 2006
	(Unaudited)			(Unaudited)

Cash Flows Used in operating activities	$	(4,716,269	)	$	(3,979,685	)
Cash flows used in investing Activities	$	(3,381,837	)	$	269,209
Cash flows from financing activities	$	1,443,883		$	11,069,069
Net effect of currency fluctuations	$	241,476		$	243,899

Net change in cash and cash equivalents	$	(6,412,747	)	$	7,602,492

Cryptometrics used $4,716,269 in operating activities for the fiscal six months ended October 31, 2007 as compared to $3,979,685 for the same period in 2006. The increase of $736,584 in net cash used in operations is primarily attributable to the net of five factors: a higher net loss of $1,100,719 in comparing the current six months ended October 31, 2007 to the same period in the prior year; offset by an adjustment for amortization of deferred finance fees of $310,310 in the six months ended October 31, 2007; lower investment in certain elements of working capital of $64,774 in the six months October 31, 2007 in comparison to lower investment in certain elements of working capital of $4,823 for the same period in the prior year; higher depreciation and amortization of $185,858 for the six months ended October 31, 2007 in comparison to $165,169 for the same period in prior year; and an adjustment of $26,815 for the six months ended October 31, 2007 associated with the gain on derivative liability in comparison to no applicable adjustment for the same period in prior year.

Cash used in investing activities during the fiscal six months ended October 31, 2007 was a net $3,381,837 as compared to the net source of $269,209 for the same period in the previous year. Cash used in investing activities in the six months ended October 31, 2007 consisted of the acquisition of fixed assets ($226,124), patent and trademark application costs ($100,529), and advances of $3,055,184 associated with the related party transaction which is described in the Notes to the Consolidated Financial Statements.

The advances associated with the related party transaction of $3,055,184 includes $1,510,184 deposited with Biodentity’s bank in the United Arab Emirates (“UAE”) in order to secure a Bid Bond posted by that bank for Biodentity’s eligibility to bid on a UAE project. The deposit was primarily funded by a one-time borrowing from Cryptometrics’ bank in the United States and the borrowing is reflected as a cash flow from financing activities of $1,443,883. It is anticipated that the deposit will be released by Biodentity’s bank and returned to Cryptometrics no later than January 31, 2008 at which time Cryptometrics’ borrowing of $1,443,883 is expected to be fully extinguished. As of October 31, 2007, Cryptometrics accrued interest associated with the borrowing was $5,840.

Cryptometrics does not have a bank credit facility or other working capital credit line under which it may borrow funds on an on-going basis.

136

The following is a summary of Cryptometrics’ non-cancellable operating leases for the periods indicated that existed as of October 31, 2007 and is based on information appearing in the Notes to the audited Consolidated Financial Statements:


Operating lease obligations	$

2008		75,383
2009		154,629
2010		159,690
2011		13,342
	$	403,044

CRYPTOMETRICS COMPENSATION DISCUSSION AND ANALYSIS

The following table sets forth certain summary information regarding total salary paid to Cryptometrics Co-Chief Executive Officers and Chief Strategy Officer for services rendered during the fiscal years ended April 30, 2005, 2006 and 2007. Except as set forth in the table below, no other Executive Officer of Cryptometrics holding office in fiscal 2007 received total annual salary and bonus exceeding $100,000. Except as described below under “employment agreements”, no Executive Officer of Cryptometrics received or was awarded any bonus or other compensation including stock options, stock appreciation rights or other long term or deferred compensation, during the fiscal years ended April 30, 2005, 2006 and 2007.


	2005		2006		2007

Robert Barra	$	26,667	$	160,000	$	196,667
Michael Vitale	$	26,667	$	160,000	$	196,667
Joel Shaw	$	120,000	$	120,000	$	123,238

For Messrs. Barra and Vitale, the base salary ranged from $26,667 in 2005 to $196,667 in 2007 for an average annual salary for the three years ended April 2007 of $127,778 per year. The increases in annual salary for Messrs. Barra and Vitale have been determined solely by the Board of Directors. Such increases have been based predominately on the following factors: (i) development and implementation of technological advancements and improvements to Cryptometrics’ product offerings, (ii) positioning of these product offerings to compete and surpass the industry leaders in tests and demonstrations in various venues and regions, (iii) ability to raise capital based on the advanced product offerings and the potential for future new business based on test results in competition, and (iv) estimated budget requirements over a succeeding twelve (12) months period.

Directors who are also employees of Cryptometrics do not receive additional compensation to serve as members of the Board of Directors. A policy has not yet been set as to how non-employee directors of Cryptometrics shall be compensated.

Messrs. Barra and Vitale, as Co-Founders of Cryptometrics, Inc., each own 2,975,000 shares of Cryptometrics Common Stock. Together these shares represent 56.14% of the total voting shares of 10,598,906 of Cryptometrics Common Stock outstanding at April 30, 2007. Further, the combined shares of Messrs. Barra and Vitale represent 49.66% of the total 11,981,863 shares of Cryptometrics Common Stock and 1,382,957 of Cryptometrics Exchange Shares outstanding as of April 30, 2007.

Messrs. Barra and Vitale comprise the Board of Directors of Cryptometrics. Neither director is independent. There is no separate compensation committee. At present, Cryptometrics does not have an executive compensation policy or a policy for grants associated with plan based awards, and does not employ performance related factors. Cryptometrics does not have a defined benefit plan or any other such plan for any of its employees.

Neither Mr. Barra nor Mr. Vitale has an employment agreement, or any other type of arrangement which would provide for target or benchmark payments at, following, or in connection with any termination or change-in-control.

Cryptometrics’ capital resources have primarily been dedicated to the development, enhancement and marketing of its technology and security systems solutions. Consequently, other than base salary, neither Mr. Barra

137

nor Mr. Vitale has been awarded or been paid a bonus or any other type of incentive compensation (whether in cash or non-cash) during the period presented in the table above.

In conjunction with Cryptometrics’ acquisition of BioDentity Systems in March 2004, Mr. Shaw and Cryptometrics entered into an employment agreement having a minimum term of 42 months.

Under the terms of his agreement, Mr. Shaw was entitled to a base salary as shown in the table above. The specified salaries were contingent upon Cryptometrics raising certain cumulative amounts of capital. Any bonus or incentive compensation was at the sole discretion of the Board of Directors. No such remuneration was awarded or paid Mr. Shaw during the period of his agreement.

For a termination without cause, Mr. Shaw would be entitled and limited to salary continuance for 18 months. His agreement does not provide for target or benchmark payments (other than the capital raising contingency noted above), at, following, or in connection with any termination or change-in-control.

There has been no transaction between Cryptometrics and any of Messrs Barra, Vitale and Shaw with a value in excess of $120,000 for the last two fiscal years, except for the salary payments described above and the entering into of the Employment Agreements described on page 72.

PRINCIPAL STOCKHOLDERS OF CRYPTOMETRICS

The following table sets forth as of the date of this Consent Solicitation/Prospectus certain information regarding the ownership of voting securities of Cryptometrics by each stockholder known to the management of Cryptometrics to be (i) the beneficial owner of more than 5% of Cryptometrics’ outstanding common stock and (ii) each of the directors and nominees for director of Cryptometrics. Except as otherwise noted, Cryptometrics believes that the beneficial owners of the common stock listed below, based on information furnished by such owners, have sole investment and voting power with respect to such shares.


	Number of Shares of			Percent of
Name	Common Stock			Common Stock(3)

Robert Barra		2,975,000	(1)		24.2%
Michael A. Vitale		2,975,000	(1)		24.2%
Joel Shaw		806,118	(2)		6.5%


(1)		Does not include options to purchase 325,000 shares of Cryptometrics Common Stock pursuant to agreements which will become effective upon the effectiveness of the Merger.

(2)		Represents number of shares of Cryptometrics Common Stock to be received upon conversion of Exchangeable Shares of Cryptometrics Canada, Inc. held.

(3)		Including 1,382,957 Cryptometrics Exchange Shares as outstanding.

LEGAL MATTERS

Jones Vargas, counsel to JAG Media, will pass on the validity of the JAG Media Common Stock to be issued to Cryptometrics stockholders in the Merger. Morgan, Lewis & Bockius LLP, counsel to JAG Media, will pass on the material U.S. federal income tax consequences as described in the heading “Material U.S. Federal Income Tax Consequences of the Merger.”

EXPERTS

The consolidated financial statements of JAG Media as of July 31, 2007 and 2006 and for the years ended July 31, 2007, 2006 and 2005 included within this Consent Solicitation/Prospectus have been so included in reliance on the report, which includes an explanatory paragraph related to JAG Media’s ability to continue as a going concern, of J.H. Cohn LLP, independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

138

The consolidated financial statements of Cryptometrics as of April 30, 2007 and 2006 and for each of its fiscal years ended April 30, 2007 and April 30, 2006, included within this Consent Solicitation/Prospectus have been so included in reliance on the report of Seligson & Giannattasio, LLP, independent auditors, given on the authority of said firm as experts in auditing and accounting.

WHERE YOU CAN FIND MORE INFORMATION

JAG Media files quarterly and annual reports, proxy statements and other information with the SEC. You may read and copy any reports, statements or other information that JAG Media files at the SEC’s public reference rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. JAG Media’s SEC filings are also available to the public from commercial document retrieval services and at the website maintained by the SEC at “http://www.sec.gov.”

JAG Media filed a Registration Statement on Form S-4 to register with the SEC the JAG Media Common Stock to be issued to Cryptometrics stockholders in the Merger. This Consent Solicitation/Prospectus is a part of the Registration Statement on Form S-4 and constitutes a prospectus of JAG Media in addition to being a consent solicitation of the stockholders of Cryptometrics. As permitted by SEC rules, this Consent Solicitation/Prospectus does not contain all the information that you can find in the Registration Statement on Form S-4 or the exhibits to that statement. No person is authorized to give any information, request your consent with regards to your Cryptometrics stock or make any representation with respect to the matters described in this document other than those contained herein and, if given or made, such information or representation must not be relied upon as having been authorized by JAG Media or Cryptometrics. This document does not constitute an offer to sell, or a solicitation of an offer to purchase, the securities offered hereby, nor does it constitute the solicitation of a proxy, or a written consent in any jurisdiction in which, or to any person to whom, it is unlawful to make such offer or solicitation. Neither the delivery of this document nor any sale made hereby, under any circumstances, shall create any implication that there has been no change in the affairs of JAG Media or Cryptometrics since the date hereof, or that the information herein is correct as of any time subsequent to its date.

139

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders
JAG Media Holdings, Inc.

We have audited the accompanying consolidated balance sheets of JAG Media Holdings, Inc. and Subsidiaries as of July 31, 2007 and 2006, and the related consolidated statements of operations, changes in stockholders’ deficiency and cash flows for the years ended July 31, 2007, 2006 and 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of JAG Media Holdings, Inc. and Subsidiaries as of July 31, 2007 and 2006, and their results of operations and cash flows for the years ended July 31, 2007, 2006 and 2005, in conformity with accounting principles generally accepted in the United States of America.

The consolidated financial statements referred to above have been prepared assuming that the Company will continue as a going concern. As further discussed in Note 2 to the consolidated financial statements, the Company’s operations have generated recurring losses and negative cash flows from operating activities. Such matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 2. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Our audits referred to above included the information in Schedule II, which presents fairly, in all material respects when read in conjunction with the consolidated financial statements, the information required to be set forth therein.


		/s/ J.H. Cohn LLP

Roseland, New Jersey
November 9, 2007

F-2

Jag Media Holdings, Inc. and Subsidiaries

Consolidated Balance Sheets

July 31, 2007 and 2006


	July 31, 2007			July 31, 2006
Assets
Current assets:
Cash and cash equivalents	$	507		$	450,618
Accounts receivable, net of allowance for doubtful accounts of $7,500 at both July 31, 2007 and 2006		34,345			15,580
Other current assets		44,426			35,333


Total current assets		79,278			501,531

Equipment, net of accumulated depreciation of $154,975 and $118,736 at July 31, 2007 and 2006, respectively		55,071			76,702


Totals	$	134,349		$	578,233


Liabilities and Stockholders’ Deficiency

Current liabilities:
Accounts payable and accrued expenses	$	1,088,819		$	234,682
Deferred revenues		18,695			22,448
Derivative liability		11,058,561			2,789,750

Total current liabilities		12,166,075			3,046,880
Convertible debentures payable, net of unamortized debt discount of $912,820 and $2,047,911 at July 31, 2007 and 2006, respectively		2,607,180			2,027,089

Total liabilities		14,773,255			5,073,969


Mandatorily redeemable Class B common stock; par value $.00001 per share:
400,000 shares designated as Series 2; 381,749 and 372,848 shares issued and outstanding at July 31, 2007 and 2006, respectively		4			4
40,000 shares designated as Series 3; 21,500 shares issued and outstanding at both July 31, 2007 and 2006		—			—


		4			4


Commitments and contingencies

Stockholders’ deficiency:
Preferred stock; par value $.00001 per share; 50,000,000 shares authorized, none issued at both July 31, 2007 and 2006
Common stock; par value $.00001 per share; 500,000,000 shares authorized; 48,048,617 shares issued and outstanding and 42,896,506 shares issued and outstanding at July 31, 2007 and 2006,respectively		480			429
Additional paid-in capital		45,806,278			44,209,217
Unearned compensation					(34,870	)
Accumulated deficit		(60,445,668	)		(48,670,516	)


Total stockholders’ deficiency		(14,638,910	)		(4,495,740	)


Totals	$	134,349		$	578,233

See Notes to Consolidated Financial Statements.

F-3

JAG Media Holdings, Inc. and Subsidiaries

Consolidated Statement of Changes in Stockholders’ Deficiency

Years Ended July 31, 2007, 2006 and 2005


	Common Stock
	Number of						Additional			Unearned			Accumulated
	Shares			Amount			Paid-In Capital			Compensation			Deficit			Total
Balance, August 1, 2004		44,235,299		$	442		$	43,570,992		$	(24,264	)	$	(43,144,495	)	$	402,675
Effect of issuance of options in exchange for services								51,200			(51,200	)					—
Amortization of unearned, stock-based compensation											35,018						35,018
Effect of issuance of common stock for purchase of business		250,000			3			42,497									42,500
Effect of issuance of common stock in exchange for services and claim settlement		262,500			3			77,498									77,501

Net loss														(1,889,165	)		(1,889,165	)

Balance, July 31, 2005		44,747,799			448			43,742,187			(40,446	)		(45,033,660	)		(1,331,471	)
Effect of issuance of options in exchange for services								56,000			(56,000	)					—
Effect of return and retirement of shares		(3,506,248	)		(35	)		35									—
Amortization of unearned stock-based compensation											61,576						61,576
Reclassification of derivative liability for nonemployee options								(63,989	)								(63,989	)
Fair value of shares issued on conversion of promissory notes payable		1,250,000			12			399,988									400,000
Shares issued on conversion of convertible debentures		404,955			4			74,996									75,000
Net loss														(3,636,856	)		(3,636,856	)

Balance, July 31, 2006		42,896,506			429			44,209,217			(34,870	)		(48,670,516	)		(4,495,740	)
Amortization of unearned, stock-based compensation								28,167									28,167
Reclassification of deferred compensation upon adoption of SFAS 123R								(34,870	)		34,870						—
Effect of issuance of common stock in exchange for services		180,000			2			62,198									62,200
Effect of repricing of employee options								70,946									70,946
Shares issued on conversion of convertible debentures		4,432,111			44			554,956									555,000
Shares issued on exercise of options		540,000			5			43,395									43,400
Capital contribution from payment by prospective merger partner of the Company’s costs related to merger								580,269									580,269
Reclassification of derivative liability upon exercise of options for 340,000 shares								292,000									292,000
Net loss														(11,775,152	)		(11,775,152	)

Balance, July 31, 2007		48,048,617		$	480		$	45,806,278		$	—		$	(60,445,668	)	$	(14,638,910	)

See Notes to Consolidated Financial Statements.

F-5

JAG Media Holdings, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

Years Ended July 31, 2007, 2006 and 2005


	2007			2006			2005
Operating activities:
Net loss	$	(11,775,152	)	$	(3,636,856	)	$	(1,889,165	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		35,707			23,785			19,684
Amortization of other assets					36,426			13,574
Amortization of unearned, stock based compensation		28,167			61,576			35,018
Loss (gain) on change in value of derivative liability		8,524,813			(1,094,246	)		—
Loss on extinguishment of debt					77,373			—
Finance charge for derivative liability in excess of debt proceeds					1,795,005			—
Amortization of debt discount		1,135,091			243,266			27,149
Writeoff of goodwill		—			—			50,400
Costs of the Company paid by potential merger partner		580,269			—			—
Effects of issuance of common stock in exchange for services		62,200			0			77,501
Effects of repricing employee options of common stock for services		70,946			—			—
Changes in operating assets and liabilities:
Accounts receivable		(18,765	)		(1,070	)		(2,270	)
Other current assets		55,418			32,123			6,586
Accounts payable and accrued expenses		856,521			275,025			147,657
Deferred revenues		(3,753	)		(6,783	)		(10,262	)


Net cash used in operating activities		(448,538	)		(2,194,376	)		(1,524,128	)


Investing activities:
Equipment purchases		(15,573	)		(40,871	)		(32,078	)
Cash paid for purchase of business		—			—			(19,212	)


Net cash used in investing activities		(15,573	)		(40,871	)		(51,290	)


Financing activities:
Proceeds from notes and debentures		—			2,025,000			2,000,000
Costs paid in connection with notes and debentures payable								(150,000	)
Proceeds from issuance of common stock upon exercise of stock options, net of receivable from employee		14,000			—			—


Net cash provided by financing activities		14,000			2,025,000			1,850,000

Net increase (decrease) in cash and cash equivalents		(450,111	)		(210,247	)		274,582
Cash and cash equivalents, beginning of year		450,618			660,865			386,283


Cash and cash equivalents, end of year	$	507		$	450,618		$	660,865


Supplemental disclosure of noncash financing activities:

Noncash effects of convertible debentures and promissory notes converted to common stock	$	555,000		$	325,000

Receivable from employees for exercise of options	$	29,400		$	—

Reclassification of derivative liability	$	292,000

Derivative liability of warrants issued equal to proceeds from debentures issued				$	2,025,000

Reclassification fair market value of nonemployee options to derivative liability				$	63,990

Effect of issuance of common stock for purchase of business							$	42,500

See Notes to Consolidated Financial Statements.

F-6

Note 1 -		Organization :

		JAG Media Holdings, Inc., a Nevada corporation, and its subsidiaries (the “Company”) gather and compile financial and investment information from contacts with financial institutions, experienced journalists, money managers, analysts and other Wall Street professionals and generate revenues by releasing such information to subscribers on a timely basis through facsimile transmissions and a web site, www.jagnotes.com. Subscribers receive, among other things, a daily early-morning investment report that summarizes newly issued research, analyst opinions, upgrades, downgrades and analyst coverage changes from various investment banks and brokerage houses and alerts, during the trading day, of rumors circulating on Wall Street. The Company is also in the business of developing related software focused on streaming video solutions, including the delivery of services already provided by the Company. Management considers all of its activities to be within the same business segment.

		The Company commenced operations in 1989 and its subscribers were initially limited primarily to institutional investors. During the year ended July 31, 2000, the Company opened its web site and began targeting retail subscribers in an effort to expand its subscriber base.

		On November 24, 2004, a newly established subsidiary of the Company, Pixaya (UK) Limited (“Pixaya”) (formerly known as TComm (UK) Limited), a company organized in the United Kingdom, acquired the business and assets of TComm Limited, a development stage company, also organized in the United Kingdom, that was developing various mobile video streaming products. The Company is continuing to develop certain of these products although such development has been limited as a result of the Company’s lack of financial resources and has added a new service to this product line (See Note 5). However, the business acquired had not generated any significant revenue as of the date of the acquisition or through July 31, 2007.

		The Company is actively pursuing potential mergers. As further discussed in Note 10 herein, on December 27, 2005, the Company entered into an agreement and plan of merger that was amended on various dates through September 18, 2007 (the “Merger Agreement”) with, among others, Cryptometrics, Inc., a Delaware corporation (“Cryptometrics”), pursuant to which Cryptometrics would merge with a newly created subsidiary of the Company. In consideration of the merger, the stockholders of Cryptometrics would acquire shares of common stock of the Company, which would, upon issuance, represent approximately 88% of the outstanding shares of the Company’s common stock, in exchange for all of the issued and outstanding capital stock of Cryptometrics. There is no assurance that the proposed transaction will be consummated.

Note 2 -		Basis of presentation and summary of significant accounting policies:

		Basis of presentation:

		The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. However, as shown in the accompanying consolidated financial statements, the Company only generated revenues of approximately $203,000, $167,000 and $240,000 and it incurred net losses of approximately $11,775,000, $3,637,000 and $1,889,000 and negative cash flows from operating activities of approximately $449,000, $2,194,000 and $1,524,000 for the years ended July 31, 2007, 2006 and 2005, respectively. In addition, as of July 31, 2007 the Company only had cash and cash equivalents available of approximately $500 and a working capital deficiency of $12,087,000. These matters raise substantial doubt about the Company’s ability to continue as a going concern.

		Management believes that in the absence of a substantial increase in subscription revenues, it is probable that the Company will continue to incur losses and negative cash flows from operating activities through at least July 31, 2008 and that the Company will need to obtain additional equity or debt financing to sustain its operations.

		Management believes that the Company will be able to obtain sufficient financing directly through the consummation of the merger with Cryptometrics or through the consummation of a merger with another appropriate merger candidate that has such financing, to enable it to continue as a going concern through at least July 31, 2008. However, if the Company cannot obtain sufficient additional financing by that date, the Company may be forced thereafter to restructure its operations, file for bankruptcy or entirely cease its operations.

F-7

The accompanying consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Use of estimates:

Principles of consolidation:

The accompanying consolidated financial statements include the accounts of JAG Media Holdings, Inc. and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Revenue recognition:

Fees for subscriptions are generally billed in advance on a monthly, quarterly, semi-annual or annual basis. Revenues from subscriptions are recognized ratably over the subscription period. Subscription fees collected that relate to periods subsequent to the date of the consolidated balance sheet are included in deferred revenues.

Cash equivalents:

Cash equivalents consist of highly liquid investments with a maturity of three months or less when acquired.

Equipment:

Equipment is stated at cost, net of accumulated depreciation. Depreciation is provided using accelerated methods over the estimated useful lives of the assets, which range from three to seven years.

Impairment of long-lived assets subject to amortization:

The Company has adopted the provisions of Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment of Long-Lived Assets” (“SFAS 144”). Under SFAS 144, impairment losses on long-lived assets subject to amortization, such as equipment, are recognized when events or changes in circumstances indicate that the undiscounted cash flows estimated to be generated by such assets are less than their carrying value and, accordingly, all or a portion of such carrying value may not be recoverable. Impairment losses are then measured by comparing the fair value of assets to their carrying amounts.

Goodwill:

The Company is required to periodically review the carrying value of any intangible assets it has recorded that are not subject to amortization, such as goodwill, to determine whether impairment may exist. Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”) requires that goodwill be assessed annually for impairment using fair value measurement techniques. Specifically, goodwill impairment is determined using a two-step process. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The estimates of fair value of a reporting unit, generally the Company’s operating segments, are determined using various valuation techniques with the primary technique being a discounted cash flow analysis. A discounted cash flow analysis requires the Company to make various judgmental assumptions including assumptions about future cash flows, growth rates, and discount rates. The assumptions about future cash flows and growth rates are based on the Company’s budget and long-term plans. Discount rate assumptions are based on an assessment of the risk inherent in the respective reporting units. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired and the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. That is, the fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized identifiable intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit. As explained in Note 5, the Company wrote off all of the Goodwill it had recorded based on an impairment test as of January 31, 2005.

Income taxes:

The Company accounts for income taxes pursuant to the asset and liability method which requires deferred income tax assets and liabilities to be computed annually for temporary differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation

F-8

allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The income tax provision or credit is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.

Stock-based compensation:

Through July 31, 2006, the Company recognized the cost of grants of options to employees and non-employees based on the fair value of the equity instruments at the date issued amortized over the periods in which the related services were rendered in accordance with the provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”). Accordingly, the Company had been estimating the fair value of stock options using an option-pricing model (generally, the Black-Scholes model) that met the criteria set forth in SFAS 123 and common stock using its market value. It had been recording such value through charges to compensation cost and corresponding credits to equity. The charges to compensation cost for the fair value of the options were being amortized to expense over the vesting period.

As required, effective August 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (Revised 2004), “Share-Based Payment” (“SFAS 123(R)”) using the modified prospective application transition method. Because the fair value recognition and the amortization provisions of SFAS No. 123 and SFAS No. 123(R) are materially consistent, the adoption of SFAS No. 123(R) did not have a significant impact on the methods used by the Company to value and account for its options or its financial position and results of operations and, accordingly, charges to compensation cost for the fair value of the options continue to be amortized to expense over the vesting period. In accordance with SFAS No. 123(R), the Company reclassified previously unamortized unearned compensation of $34,870 from unearned compensation to additional paid-in capital as of the date of adoption. There was no charge to operations.

Net earnings (loss) per share:

The Company presents “basic” earnings (loss) per share and, if applicable, “diluted” earnings per share pursuant to the provisions of Statement of Financial Accounting Standards No. 128, “Earnings per Share.” Basic earnings (loss) per share is calculated by dividing net income or loss by the weighted average number of common shares outstanding during each period. The calculation of diluted earnings per share is similar to that of basic earnings per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if all potentially dilutive common shares, such as those issuable upon the exercise of stock options and warrants, and the conversion of outstanding convertible debentures, were issued during the period and the treasury stock method had been applied to the proceeds from the exercise of the options and warrants and net income or loss was adjusted for interest on the convertible debentures.

As of July 31, 2007, there were stock options, warrants and convertible debentures outstanding for the purchase of a total of 1,000,000, 12,000,000 and 4,050,000 shares of common stock, respectively (see Notes 4 and 6). As of July 31, 2006, there were stock options, warrants and convertible debentures outstanding for the purchase of a total of 1,420,000, 12,000,000 and 10,507,246 shares of common stock, respectively. As of July 31, 2005, there were stock options outstanding for the purchase of a total of 2,510,000 shares of common stock. However, diluted per share amounts have not been presented in the accompanying consolidated statements of operations because the Company had a net loss in the years ended July 31, 2007, 2006 and 2005 and the assumed effects of the exercise of the Company’s stock options and warrants and the conversion of convertible debentures that were outstanding during all or part of those periods would have been anti-dilutive.

Derivative and Convertible Financial Instruments

The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks.

The Company reviews the terms of convertible debt and equity instruments it issues to determine whether there are embedded derivative instruments, including an embedded conversion option, that are required to be bifurcated and accounted for separately as derivative financial instruments. In connection with the sale of convertible debt and equity instruments, the Company may issue freestanding warrants and options that may, depending on their terms, be accounted for as derivative instrument liabilities, rather than as equity.

F-9

The discount from the face value of the convertible debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to income, using the effective interest method. Since the conversion of the secured convertible debentures issued by the Company during the year ended July 31, 2006 could have been at a discount from the market price and, accordingly, could have resulted in the issuance of an indeterminable number of common shares, the Company determined that it would be prohibited from concluding that it would have a sufficient number of authorized and unissued shares to net -share settle any of those warrants or any other warrants or options previously issued or granted to non-employees. Therefore, as of the date the secured convertible debentures and the related warrants were issued, the Company recorded the related fair value of all warrants issued with the debentures and options previously issued to non-employees as a liability. Accordingly, subsequent changes in the fair value of such options and warrants at the end of each reporting period have been and will be recorded as charges or credits to the Company’s results of operations.

Recently Issued Accounting Standards:

The Financial Accounting Standards Board and its Emerging Issues Task Force (the “EITF”) have issued certain accounting pronouncements as of July 31, 2007 that will become effective in subsequent periods; however, management of the Company does not believe that any of those pronouncements would have significantly affected the Company’s financial accounting measurements or disclosures had they been in effect during 2007 and 2006, and it does not believe that any of those pronouncements will have a significant impact on the Company’s consolidated financial statements at the time they become effective.

Note 3 — Income taxes:

As of July 31, 2007, the Company had net operating loss carryforwards of approximately $35,224,000 available to reduce future Federal taxable income which will expire from 2019 through 2027.

As of July 31, 2007 and 2006, the Company’s deferred tax assets consisted of the effects of temporary differences attributable to the following:


	July 31
	2007			2006
Deferred revenues, net	$	6,000		$	8,000
Unearned compensation		31,000			54,000
Net operating loss carryforwards		13,262,000			12,165,000

		13,299,000			12,227,000
Less valuation allowance		(13,299,000	)		(12,227,000	)


Total	$	—		$	—

Due to the uncertainties related to, among other things, the extent and timing of its future taxable income, the Company offset its net deferred tax assets by an equivalent valuation allowance as of July 31, 2007.

The Company had also offset the potential benefits from its net deferred tax assets by an equivalent valuation allowance as of July 31, 2006, 2005 and 2004 of approximately $12,227,000, $11,843,000 and $12,372,000. As a result of increases (decreases) in the valuation allowances of $1,072,000, $384,000 and ($529,000) during the years ended July 31, 2007, 2006 and 2005, respectively, which were primarily attributable to the net loss incurred during each of those years, the exercise of options in 2007, and the expiration and cancellation of options and warrants in 2005 that had not been exercised, there are no credits for income taxes reflected in the accompanying consolidated statements of operations to offset pre-tax losses.

Note 4 — Equity and debt financing agreements with YA Global Investments, L.P.:

On April 9, 2002, the Company entered into an equity line purchase agreement (the “Equity Line Agreement”) with YA Global Investments, L.P. (YA Global”) (formerly known as Cornell Capital Partners, L.P.) pursuant to which the Company had, in effect, put options whereby, subject to certain conditions, it could have required YA Global to purchase shares of its common stock from time to time at an aggregate purchase price of $10,000,000 through August 2006. The purchase price was to be 95% of the lowest closing bid price of the Company’s common stock over a specified number of trading days commencing on specified dates. YA Global was entitled

F-10

to a cash fee equal to 5% of the gross proceeds received by the Company from YA Global in connection with each put. As of May 25, 2006, the date the Equity Line Agreement was effectively cancelled, and July 31, 2005 and 2004, $4,035,000 of the Company’s Equity Line with YA Global had been utilized.

On January 25, 2005, the Company entered into a Promissory Note Agreement with YA Global for a loan of $2,000,000. The $2,000,000 loan from YA Global was funded on February 2, 2005 net of a debt discount of $100,000 deducted at the time of funding which was being amortized over the original term of the loan. The unamortized debt discount was approximately $73,000 as of July 31, 2005 and $32,000 as of May 25, 2006 when the promissory note was converted into common stock and a secured convertible debenture. The face amount of the promissory note and interest on the amount from time to time outstanding at a rate of 12% per year was originally payable either (i) out of the net proceeds to be received by the Company upon delivery of put notices under the Equity Line Agreement or (ii) in full by the Company within 663 calendar days, subsequently extended to 753 calendar days, of January 25, 2005 regardless of the availability of proceeds under the Equity Line Agreement, unless an extension was mutually agreed to by the parties in writing.

Pursuant to the promissory note, the Company had agreed to deposit in escrow 35 put notices under the Equity Line Agreement in an amount of $60,000 each and one request for a put under the Equity Line Agreement in an amount of $181,017. Under the terms of the promissory note, as amended on August 5, 2005, the put notices were to have been held in escrow and released every 14 days commencing November 4, 2005.

All put notices were returned to the Company on May 25, 2006, when the Company terminated its Equity Line with YA Global, converted $250,000 of the principal of its $2,000,000 promissory note payable to YA Global into 1,250,000 shares of the Company’s common stock which were issued on such date for which the fair value was $400,000, and converted the remaining principal amount of $1,750,000 and accrued interest of $150,000 on the promissory note into a secured convertible debenture in the principal amount of $1,900,000. As the cash flows of the new debentures were substantially different from those of the promissory notes, the restructuring qualified as an extinguishment for financial accounting purposes. Accordingly, the Company recorded a loss on extinguishment of $77,373 during the year ended July 31, 2006 (representing the fair value of the shares in excess of the principal converted plus $31,674 of debt discount written off less $104,301 of accrued interest forgiven). In addition, the Company issued similar secured convertible debentures to YA Global in the principal amounts of $1,250,000 on May 25, 2006 and $1,000,000 on May 31, 2006, which provided the Company with net proceeds of approximately $2,025,000 after fees and costs of $225,000 paid to YA Global which were recorded as part of the debt discount on the debentures. All the secured convertible debentures bear interest at the rate of 10% per year and mature three years after issuance. They are convertible through maturity into shares of the Company’s common stock as described below.

The Company was required to issue irrevocable transfer agent instructions relating to the issuance of stock certificates on conversion of the debentures or exercise of the warrants. The Company was also required to deliver on behalf of itself and its subsidiary, Pixaya LLC (formerly JAG Media LLC), security agreements executed by the Company and its subsidiary granting YA Global a security interest in all their respective assets. The Company and its subsidiary could not incur any further liens, declare a dividend, issue any guarantees or incur any new indebtedness in excess of $25,000 other than trade accounts payable. The security agreements terminate once a registration statement covering shares of common stock issuable upon conversion has been effective for 60 days and other conditions have been met. At such time, the security interest will automatically terminate provided the Company’s common stock is trading on the OTC Bulletin Board at a price above $0.08 per share and there has occurred no event of default under the convertible debentures. The security interest had not been terminated by YA Global as of July 31, 2007.

YA Global has the right to convert the debentures, at its sole option, into shares of the Company’s common stock at a conversion price which shall be the lower of (i) $0.40 per share or (ii) a 10% discount to the lowest volume weighted average price, as reported by Bloomberg, of the Company’s common stock during the 30 trading days prior to the conversion date (see Note 10).

If the Company issues shares of common stock or common stock equivalents, such as rights, warrants, options or other securities or debt that are convertible into or exchangeable for shares of common stock entitling any person to

F-11

acquire shares of common stock at a price per share that is less than the then fixed conversion price then, at the sole option of the holder of a debenture, the fixed conversion price shall be adjusted to mirror the lower conversion, exchange or purchase price for such new common stock, or common stock equivalents, at issue. No such adjustment shall be made as a result of issuances and exercises of options for compensatory purposes under the Company’s 1999 Long-Term Incentive Plan (see Note 6). The fixed conversion price of the debentures is also subject to adjustment in connection with certain corporate transactions.

In connection with the foregoing May 25, 2006 transaction, the Company issued warrants to YA Global to purchase 12,000,000 shares of common stock. The warrants are exercisable through May 2011 at prices ranging from $0.40 to $0.80 per share (see Note 6). The exercise price and number of shares issuable pursuant to each of the warrants are subject to antidilution provisions.

Since the conversion of the secured convertible debentures could result in the issuance of an indeterminable number of common shares since they are convertible at a discount from the market price, the Company determined that based on the guidance in the consensus for EITF Issue No. 00-19 (“EITF 00-19”) “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in a Company’s Own Stock”, the Company will be prohibited from concluding that it will have a sufficient number of authorized and unissued shares to net - -share settle any of those warrants or any other warrants or options previously issued or granted to non-employees. Therefore, as of the date the secured convertible debentures and the related warrants were initially issued, the Company recorded the related fair value of all warrants issued with the debentures and options previously issued to non-employees as a liability as explained below. Subsequent changes in the fair value of such options and warrants at the end of each reporting period have been and will be recorded as charges or credits to the Company’s results of operations.

As of May 25, 2006, the warrants for the purchase of 12,000,000 shares were valued at approximately $3,820,000 based on the Black-Scholes options pricing model assuming a risk free interest rate of 6% annually, no dividend payments, annual volatility of 335.722%, exercise prices ranging from $0.40 to $0.80, and the stock price of $0.32 per share when issued. Accordingly, the Company recorded an additional debt discount of $2,025,000 to offset the net cash proceeds received from YA Global for the debentures and a finance charge to operations of $1,795,000 to reflect the excess of fair value of the warrants over the debt proceeds. As of July 31, 2006, the fair value of the warrants was recalculated using the Black-Scholes option pricing model assuming a risk free interest rate of 6% annually, no dividend payments, annual volatility of 338.441%, exercise prices ranging from $0.40 to $0.80, and the stock price of $0.23 when valued. This resulted in a decrease in the carrying value of the derivative liability to approximately $2,744,000 and the recognition of an unrealized gain on derivative liability of $1,076,000 for the year ended July 31, 2006.

As of July 31, 2007, the warrants for the purchase of 12,000,000 shares were valued at approximately $11,059,000 based on the Black-Scholes options pricing model assuming a risk free interest rate of 6% annually, no dividend payments, annual volatility of 216.543%, exercise prices ranging from $0.40 to $0.80, and the stock price of $0.95 per share when valued. This resulted in the recognition of unrealized losses on derivative liability of approximately $8,314,000 for the year ended July 31, 2007.

As explained above, EITF 00-19 required the Company to record the fair value of the warrants issued in connection with the debentures at their gross value of approximately $3,820,000 and fully offset the net proceeds received with an equivalent amount of debt discount. As a result, there was no amount allocable to the net carrying value of the convertible debentures upon issuance on May 25, 2006 although they could have been converted as of that date into 6,756,757 shares of common stock with an aggregate fair value of approximately $2,252,000. This amount represents a beneficial conversion feature that could not be recorded in the consolidated financial statements since it would have resulted in the recording of an aggregate debt discount that would have exceeded the net proceeds from the issuance of the debentures which is prohibited by EITF 00-19.

The issuance of convertible debentures and warrants to YA Global also caused the Company to reclassify the fair value of 200,000 options issued to a consultant that were outstanding as of May 25, 2006 from stockholders’ equity to the derivative liability and include the fair value of all options and warrants subsequently granted to non-employees for services as a derivative liability until the options and warrants are exercised or expire. As of May 25, 2006 the warrants were valued at approximately $64,000 using the Black-Scholes option pricing model. As of July 31, 2006, the fair value of the warrants was recalculated which resulted in a decrease in the carrying value of the derivative liability to approximately $46,000 and the recognition of an unrealized gain on derivative liability of $18,000 for the year ended July 31, 2006. On October 2, 2006, the Company granted options to another consultant with a fair value at the date of grant of approximately $36,000 which is being amortized over the service period. The fair value at the date of the grant was determined using the Black-Scholes option pricing model assuming a risk free interest rate of 6% annually, no dividend payments, annual volatility of 340.641%, an exercise price of $0.05 per

F-12

share, and the stock price of $0.18 per share when issued. On February 21, 2007, a consultant exercised the options to purchase 200,000 shares of common stock at $0.02 per share resulting in proceeds of $4,000 and the reclassification of $116,000 (the fair value of the options at the exercise date) from the derivative liability to equity. On June 11, 2007, a consultant exercised options to purchase 200,000 shares of common stock at $0.05 per share resulting in proceeds of $10,000 and the reclassification of $176,000 (the fair value of the options at the exercise date) from the derivative liability to equity. As of July 31, 2007 all the warrants issued to non-employees had been exercised or expired.

During the year ended July 31, 2006, YA Global converted debentures in the principal amount of $75,000 into 404,955 shares of the Company’s common stock and the Company recorded amortization of debt discount attributable to the debentures of approximately $202,000 including $75,000 which was accreted as a result of the conversions. As of July 31, 2006, the debentures had a net carrying value of $2,027,000 reflecting the outstanding principal balance due of $4,075,000 reduced by remaining unamortized debt discounts aggregating approximately $2,048,000.

During the year ended July 31, 2007, YA Global converted debentures in the principal amount of $555,000 into 4,432,111 shares of the Company’s common stock and recorded amortization of debt discount attributable to the debentures of approximately $1,135,000, including $555,000 which was accreted as a result of the conversions. As of July 31, 2007, the debentures had a net carrying value of approximately $2,607,000, reflecting the outstanding principal balance due of $3,520,000 reduced by remaining unamortized debt discounts aggregating approximately $913,000.

Subsequent to the year ended July 31, 2007 and through November 9, 2007, YA Global converted debentures in the principal amount of $1,600,000 into 4,000,000 shares of the Company’s common stock.

Upon an event of default (as defined in the promissory note), the entire principal balance and accrued interest of the promissory note, and all other obligations of the Company under the promissory note, would become immediately due and payable without any action on the part of YA Global.

Note 5 – Acquisition:

On November 24, 2004, the Company and Pixaya (UK), the Company’s newly organized subsidiary, entered into a Business Sale Agreement (the “Sale Agreement”) with TComm Limited, a company organized in the United Kingdom (“Seller”). The Company entered into the transaction to access the seller’s development stage software, which the Company believed offered a new platform for delivery of the Company’s services as well as being valuable in its own right.

The transactions contemplated by the Sale Agreement were consummated on November 24, 2004. Under the Sale Agreement, Pixaya purchased the Seller’s software development business, which is focused on streaming video solutions, and all of its assets related to that business. The business acquired had not generated any significant revenue as of the date of the acquisition or through July 31, 2007.

The acquired product lines the Company originally intended to continue to develop included: (1) Pixaya Mobile (previously known as TComm TV), which was intended to deliver on-demand video/audio clips to various java-based and Symbian-based mobile phones and (2) SurvayaCam (previously known as CCMTV), which is currently under development and will consist of software programs (and related hardware) intended to enable field personnel to send real-time video streams from the field to a central point where they can be viewed by one or more persons. During the year ended July 31, 2006, the Company discontinued development of Pixaya Mobile. The Company is unable to estimate the amount of resources that will be required to complete the development of the SurvayaCam product line.

The purchase price paid to TComm Limited consisted of (i) 250,000 shares of the Company’s common stock, having a value based on the closing price of the Company’s common stock as of the close of business on the day prior to the acquisition, equal to approximately $42,500 and (ii) the payment of approximately $19,000 in cash. The purchase price was allocated to the fair value of assets and goodwill as follows:


Equipment	$	11,000

Other Assets		100

Goodwill		50,400


Total	$	61,500

F-13

As of January 31, 2005, management tested the goodwill for impairment and concluded that it had been impaired. Therefore, the Company has recognized a charge of $50,400 for the write-off of goodwill in the year ended July 31, 2005.

In addition, the Seller agreed not to compete with the business conducted by Pixaya for a period of two years from the closing date of the transaction. The Sale Agreement also contains customary representations and warranties. The Seller has agreed to indemnify Pixaya for any damages which may result from a breach of its warranties but only if the damages exceed approximately $20,000.

Pixaya had no significant revenues from its inception in November 2004 through July 31, 2007.

Unaudited pro forma results of operations for year ended July 31, 2005 assuming the Company had acquired the business and the related assets from the Seller as of the beginning of that year has not been presented because such information would not differ materially from the historical results of operations for such period.

Note 6 – Other issuances of common stock and stock options:

Authorized shares:

On April 26, 2006, the Company’s articles of incorporation were amended to increase the total number of common shares authorized for issuance from 250,000,000 shares to 500,000,000 shares of common stock, par value $0.00001 per share. As a result, the total number of shares of all classes of capital stock authorized for issuance by the Company increased from 200,000,000 shares to 550,440,000 shares with a par value of $.00001 per share, of which 50,000,000 shares are authorized for issuance as preferred stock, 500,000,000 shares are authorized for issuance as common stock, 400,000 shares are authorized for issuance as Series 2 Class B common stock and 40,000 shares are authorized for issuance as Series 3 Class B common stock.

The shares of Series 2 and Series 3 Class B common stock will be nonvoting, have dividend and liquidation rights equal to the Class A common stock and be redeemable. Redemption by the Company shall be mandatory within six months (or as soon thereafter as permitted by law) following the final resolution of any successor lawsuit brought by the Company relating to the subject matter of the Company’s now dismissed lawsuit against certain brokerage firms (JAG Media Holdings, Inc. v. A.G. Edwards & Sons, et al.) in U.S. District Court for the Southern District of Texas, which date shall be determined by the board of directors. The redemption price per share of the Series 2 Class B common stock will be the greater of (i) the par value of each share or (ii) the amount obtained by dividing (a) 90% of the net proceeds to the Company of such lawsuit after payment of fees and expenses incurred in connection with such lawsuit and all taxes on net income accrued or paid with respect to such amount by (b) the total number of shares of Series 2 Class B common outstanding. The redemption price per share of the Series 3 Class B common stock will be the greater of (i) the par value of each share or (ii) .0025% of 10% of the net proceeds to the Company of such lawsuit after payment of fees and expenses incurred in connection with such lawsuit and all taxes on net income accrued or paid with respect to such amount.

Since the value of the Series 2 and Series 3 Class B common stock is contingent upon the outcome of a pending or successor litigation, the Company recorded the shares of Series 2 and Series 3 Class B common stock that were originally issuable during the year ended July 31, 2003 at their total par value of $4.20. Since the Company will be required to distribute substantially all of the proceeds of the pending litigation to the holders of Series 2 and Series 3 Class B common stock, the Company has classified the shares as the equivalent of mandatorily redeemable preferred stock and excluded their carrying value from stockholders’ equity in the accompanying July 31, 2007 and 2006 consolidated balance sheets pursuant to the rules and regulations of the Securities and Exchange Commission and Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.”

Issuance of common stock:

During the year ended July 31, 2007, YA Global converted $555,000 of the principal balance of the debentures discussed in Note 4 into 4,432,111 shares of the Company’s common stock.

On July 16, 2007, employees of the company exercised options to purchase 140,000 shares of common stock at $0.21 per share. The Company did not receive the proceeds of $29,400 until August 13, 2007 and, accordingly, the balance receivable was included in other current assets at July 31, 2007. On June 11, 2007, the Company received proceeds of $10,000 when a consultant exercised options to purchase 200,000 shares of common stock at $0.05 per share. On February 21, 2007, the Company received proceeds of $4,000 when a consultant exercised the options to purchase 200,000 shares of common stock at $0.02 per share.

F-14

On December 26, 2006 the Company issued a total of 180,000 shares of common stock with an aggregate fair value of $62,200 to certain employees for services, which was charged to general and administrative expense

As further explained in Note 4, during the year ended July 31, 2006, the Company terminated its Equity Line Agreement with YA Global and converted $250,000 of the principal of its $2,000,000 Promissory Note payable to YA Global into 1,250,000 shares of the Company’s common stock.

During the year ended July 31, 2006, YA Global converted $75,000 of the principal balance of the debentures discussed in Note 4 into 404,955 shares of the Company’s common stock.

On March 4, 2005, the Company settled a dispute with a consultant in connection with his performance of various investment banking services for the Company. The claim was settled for $175,000, of which $100,000 was paid in cash and the balance was paid by issuing 250,000 shares of common stock with an aggregate fair value of $75,000. The cost of the settlement has been included in operations for the year ended July 31, 2005.

In November 2004, the Company issued 250,000 shares of common stock in connection with the acquisition of TComm Limited (see Note 5).

Cancellation of common stock and stock options:

During the Company’s fiscal quarter ended January 31, 2006, the Company received the following from a stockholder: (i) instructions for the cancellation of an outstanding option to acquire 1,000,000 shares of the Company’s common stock; (ii) stock certificates and a stock power transferring back to the Company 3,506,248 shares of common stock; and (iii) a stock power to transfer back to the Company 7,981 shares of Series B common stock, all of which shares were cancelled by the Company resulting in an increase in additional paid-in capital and a decrease in the par value of common stock of $35. The Company paid no consideration for the return of such shares or cancellation of the option.

Stock options:

As of July 31, 2007, the Company has options outstanding for the purchase of 1,000,000 shares of, effectively, common stock all of which were granted pursuant to the Company’s 1999 Long-term Incentive Plan (the “Incentive Plan”) which provides for individual awards to officers, employees, directors, consultants and certain other individuals that may take the form of stock options and certain other types of awards for which the value is based in whole or in part upon the fair market value of, the Company’s common stock. The number of shares of common stock that may be subject to all types of awards under the Incentive Plan as amended may not exceed 6,000,000 shares. The options typically vest upon grant but in no case later than two and one-half years after grant and expire the earlier of the tenth anniversary of the grant or the 90th day following termination of employment; provided that during such 90 day period the option will be exercisable only to the extent it was vested as of the date of such termination.

The Company has issued the options, from time to time, to employees as compensation and to nonemployees, including investment analysts and commentators that have entered into agreements to provide the Company with financial information that is released to subscribers, as consideration for consulting, professional and other services. As explained in Note 2, the Company has recognized the cost of such issuances based on the fair value of the options and other equity instruments issued over the periods in which the related services are rendered in accordance with the provisions of SFAS 123 and, subsequent to July 31, 2006, SFAS 123(R). Accordingly, the cost of such equity instruments may be initially charged directly to compensation expense or to unearned compensation which is subsequently amortized to expense.

As of July 31, 2007, the Company has the ability to issue options to purchase 5,000,000 additional shares of common stock under the Incentive Plan.

The following table summarizes information about the number of shares of common stock subject to options that were outstanding at July 31, 2007 as a result of issuances of options to employees and nonemployees as compensation for services:

F-15


						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic
	Shares			Prices		Term		Value
Options outstanding, August 1, 2005		2,510,000
Granted		450,000		$	.02
Canceled		(1,540,000	)	$	1.17

Options outstanding, July 31, 2006		1,420,000		$	.12
Granted		200,000		$	.05
Exercised		(540,000	)	$	.08
Canceled		(80,000	)	$	.69

Options outstanding, July 31, 2007		1,000,000		$	.02		5.08	$	930,000

Options exercisable, July 31, 2007		1,000,000		$	.02		5.08	$	930,000

The fair value of each option granted by the Company in the years ended July 31, 2007, 2006 and 2005 were estimated using the Black-Scholes option pricing model with the following assumptions:


	Year Ended	Year Ended	Year Ended
	July 31, 2007	July 31, 2006	July 31, 2005
Risk free interest rate	6.00%	6.00%	4.50%
Dividend yield	0%	0%	0%
Expected life	5 years	5 years	5 years
Expected volatility factor	216.543%	270.79% to 279.14%	157.42% to 171.16%

Expected volatilities are based on historical volatility of our stock. We have adopted the guidance of the SEC’s Staff Accounting Bulletin No. 107 that notes if share options have “plain vanilla” characteristics, a simplified method of estimating the expected life of the option may be employed temporarily. The simplified method utilizes the average of the vested term and the original contract term. Our short term historical experience with exercise and post-vesting employment termination behavior supports this method for determining the option’s expected life.

When sufficient historical experience has been obtained, we will use such experience for future estimations of the expected life. The expected life represents the period of time that options granted are expected to be outstanding. The risk-free rate is based on the U.S. Treasury rate with a maturity corresponding to the options expected life.

On July 11, 2007, the per share exercise prices of options to purchase 140,000 shares of common stock previously issued to employees was reduced from prices ranging from $0.50 to $1.00 to $0.21 to settle accrued compensation for these employees of $66,000. As required by SFAS 123(R), incremental compensation cost of approximately $4,000 was recognized for the excess of the fair value of the modified award over the fair value of the original award immediately before the modification. As a result, the Company increased additional paid-in capital by $70,946. The fair value of the options at the date of the modification was determined assuming a risk free interest rate of 6.0% annually, no dividend payments, annual volatility of 216.54%, an exercise price of $0.21 and a stock price when modified of $1.17 per share.

As of July 31, 2007, approximately $4,000 of expense related to such options has yet to be recognized.

Warrants issued:

During 2006, the Company issued warrants to purchase 12,000,000 shares of common stock in connection with debt financing (see Note 4) to YA Global. These warrants had per share exercise prices ranging from $0.40 to $0.80, will expire in May 2011 and had an aggregate fair value of approximately $3,834,000 when issued and approximately $11,387,000 and $2,744,000 as of July 31, 2007 and 2006, respectively.

The following table summarizes information about the number of shares of common stock subject to warrants that were outstanding at July 31, 2007.


Warrants Outstanding							Warrants Exercisable
					Weighted
					Average Years		Weighted
					of Remaining		Average
			Number		Contractual		Exercise		Number		Weighted Average
	Exercise Prices		Outstanding		Life		Price		Exercisable		Exercise Price
	$	.40		2,000,000		3.82	$	.40		2,000,000	$	.40
		.50		2,000,000		3.82		.50		2,000,000		.50
		.60		2,000,000		3.82		.60		2,000,000		.60
		.70		3,000,000		3.82		.70		3,000,000		.70
		.80		3,000,000		3.82		.80		3,000,000		.80


	$	.40-$.80		12,000,000		3.82	$	.40-$.80		12,000,000		.63

F-16

		Other Equity Transactions

		As explained in Notes 1 and 10, the Company entered into the Merger Agreement with, among others, Cryptometrics, pursuant to which Cryptometrics would merge with a newly created subsidiary of the Company. Pursuant to the terms of the Merger Agreement, Cryptometrics has paid various legal and accounting costs, totaling approximately $580,000 on behalf of the Company, that will not have to be repaid by the Company to Cryptometrics in the event that the merger is not successfully completed. The costs paid by Cryptometrics have been charged to operating expenses and the amounts received by the Company have been recorded as a capital contribution and included in additional paid-in capital.

Note 7 -		Employee benefit plans:

		The Company maintains a profit-sharing plan and a money purchase plan for the benefit of all eligible employees. The Company’s contributions to these defined contribution plans are made on a discretionary basis. The Company made no contributions to the plans in 2007, 2006 and 2005.

Note 8 -		Commitments and contingencies:

		Concentrations of credit risk:

		Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. From time to time the Company’s cash account balances exceed the Federal insurance limit of $100,000. The Company reduces its exposure to credit risk by maintaining its cash deposits with major financial institutions and monitoring their credit ratings. Accordingly, management does not believe that the Company was exposed to significant credit risk at July 31, 2007.

		In addition, the Company routinely assesses the financial strength of its customers and establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information.

		Employment agreements:

		In connection with the acquisition of Pixaya, Pixaya entered into employment agreements on November 24, 2004 with four individuals, all of whom were previously employed by Pixaya. The employment agreements have a term of three years and automatically renew unless terminated by either party. As a result, the Company’s obligations for cash payments under the employment agreements subsequent to July 31, 2007 are as follows:


Year ending	Amount
July 31, 2008	$	53,000

		Leases:

		During 2007, 2006, and 2005, the Company had been leasing office space under month-to-month leases and noncancelable leases. Rent expense under all such leases, which were classified as operating leases, totaled approximately $26,000, $29,000 and $15,000 for 2007, 2006 and 2005, respectively. As of July 31, 2007, the Company was not subject to any significant noncancelable office leases.

		Litigation:

		The Company is a party to various claims and lawsuits incidental to its business. In the opinion of management, it is probable that the resolution of such contingencies will not materially affect the consolidated financial position or results of operations of the Company in subsequent years.

		Bay Point Investment Partners, LLC (“Bay Point”) had threatened to commence litigation against the Company, certain of its officers and directors and others. The Bay Point claim related to its purchase of shares of the Company’s stock in private placements on December 10, 2002 and June 19, 2003. Bay Point alleged, among other things, various disclosure failings as well as the Company’s failure to register the shares it purchased in the June 19, 2003 private placement by the date provided in the placement agreement and to use the proceeds as Bay Point claims they were intended to be used. In May 2006, the Company settled its dispute with Bay Point by the payment of $250,000 for which it has received releases from Bay Point and other claimants. The cost of the settlement has been included in results of operations for the year ended July 31, 2006.

Note 9 -		Fair value of financial instruments:

		The Company’s material financial instruments at July 31, 2007 for which disclosure of estimated fair value is required by certain accounting standards consisted of cash and cash equivalents, accounts receivable, accounts payable, and the loan payable to YA

F-17

		Global. In the opinion of management, the financial instruments other than the loan payable were carried at values that approximated their fair values at July 31, 2007 because of their liquidity and/or their short-term maturities.

Note 10 -		Cryptometrics merger:

		As explained in Note 1, the Company entered into the Merger Agreement on December 27, 2005, that has been amended on various dates through September 18, 2007, with, among others, Cryptometrics pursuant to which Cryptometrics would merge with a newly created subsidiary of the Company. In consideration of the merger, the stockholders of Cryptometrics would acquire shares of common stock of the Company, which would, upon issuance, represent approximately 89.66% of the combined companies’ outstanding shares of common stock, in exchange for all of the issued and outstanding shares of common stock of Cryptometrics. The shares of common stock to be received by the stockholders of Cryptometrics are being registered under the U.S. Securities Act of 1933, as amended. If consummated, the proposed transaction would be accounted for as a reverse acquisition in which Cryptometrics would be the acquirer for accounting purposes.

		At the closing of the proposed transaction, the Company’s current directors would resign as directors of the Company and would also resign as officers and executives of the Company. The Company’s board of directors would be replaced with designees of Cryptometrics.

		Until the Company and Cryptometrics agree otherwise, the Merger Agreement, notwithstanding approval by the Cryptometrics’ stockholders may be cancelled with or without any reason at any time by either of them with no liability.

		In addition, the proposed transaction is still subject to various conditions being satisfied prior to closing, including, among others, (i) the representations and warranties of the parties being true and correct, (ii) the Company’s common stock having been authorized for trading on the OTC Bulletin Board or the OTC Pink Sheets, on the Nasdaq Capital Market, and (iii) the Company’s indebtedness not exceeding $4,350,000.

		There is no assurance that the Company or Cryptometrics will not cancel the Merger Agreement, that the conditions of the proposed transaction will be fulfilled and that the proposed transaction between the Company and Cryptometrics will be consummated. The Merger Agreement has an automatic termination date which the parties to it have extended from time to time, but they are under no obligation to do so. As explained in Notes 1 and 6, pursuant to the terms of the Merger Agreement, Cryptometrics has paid various legal and accounting costs on behalf of the Company that will not have to be repaid by the Company to Cryptometrics in the event that the merger is not successfully completed. The costs paid by Cryptometrics have been charged to operating expenses and the amounts received by the Company have been recorded as a capital contribution and included in additional paid-in capital. Pursuant to various amendments to the Merger Agreement, if the transaction is terminated by the Company or for certain other reasons, under certain conditions the Company has agreed to issue Cryptometrics up to 1,000,000 shares of its common stock in consideration for various costs aggregating $580,000 advanced and to be advanced by Cryptometrics for the account of the Company. In addition, in consideration of $167,660 of such advances, the Company granted a non-exclusive, perpetual, royalty free license to Cryptometrics to use certain of the intellectual property of Pixaya.

		In connection with the proposed merger, on various dates from January 24, 2007 through September 18, 2007, the secured convertible debentures and warrants issued to YA Global were amended. As a result, on the date the proposed merger between the Company and Cryptometrics closes and becomes effective, (i) Cryptometrics will assume all of the rights and obligations under those amended agreements on behalf of the post-merger, combined company, and (ii) the secured convertible debentures would become convertible at a discount of 5% to the lowest volume weighted average price of the Company’s common stock during the 30 trading days prior to the conversion date and the warrants issued to YA Global would become convertible at a discount of 12% to the average of the volume weighted average price of the Company’s common stock during the 30 trading days prior to the exercise date.

Note 11 -		Restatement of Unaudited Interim Financial Statements

		In connection with the preparation of the Annual Report on Form 10-K of the Company for the fiscal year ended July 31, 2007, the Company's independent registered public accounting firm brought to the attention of the management of the Company that certain of the Company’s legal and accounting costs which, pursuant to the terms of the Merger Agreement with Cryptometrics were paid for by Cryptometrics, should have been charged to operating expenses and the amounts received by the Company should have been recorded as capital contributions and included in additional paid-in capital in the periods in which the costs were incurred (see Note 6). As a result, management completed an investigation focused on the Company’s accounting for all expenses paid for by Cryptometrics during the term of the Merger Agreement and determined that certain of the expenses should have been recorded in each of the quarters ended October 31, 2006, January 31, 2007 and April 30, 2007.

F-18

JAG Media Holdings, Inc. and Subsidiaries
Restated Condensed Consolidated Balance Sheet (Unaudited)
October 31, 2006


	As Previously			Restatement
	Reported			Adjustment			As Restated
	10/31/2006			10/31/2006			10/31/2006
Assets

Current assets:
Cash and cash equivalents	$	35,501		$	—		$	35,501
Accounts receivable, net of allowance for doubtful accounts of $7,500		20,960						20,960
Other current assets		138,748						138,748


Total current assets		195,209			—			195,209

Equipment, net of accumulated depreciation of $127,798		83,214						83,214


Total	$	278,423		$	—		$	278,423


Liabilities and Stockholders’ Deficiency

Current liabilities:
Accounts payable and accrued expenses	$	236,987		$	—		$	236,987
Deferred revenues		19,444						19,444
Derivative liability		2,466,660			(133,861	)		2,332,799


Total current liabilities		2,723,091			(133,861	)		2,589,230

Convertible debentures payable, net of unamortized debt discount of $1,678,813		2,196,187						2,196,187


Total liabilities		4,919,278			(133,861	)		4,785,417


Mandatorily redeemable Class B common stock; par value $.00001 per share: 400,000 shares designated as Series 2: 381,014 shares issued and outstanding		4						4

40,000 shares designated as Series 3; 21,500 shares issued and outstanding		—						—


		4						4


Commitments and contingencies

Stockholders’ deficiency:
Preferred stock; par value $.00001 per share; 50,000,000 shares authorized, none issued
Common stock; par value $.00001 per share; 500,000,000 shares authorized; 44,579,589 shares issued and outstanding		446						446
Additional paid-in capital		44,383,563			27,161			44,410,724
Accumulated deficit		(49,024,868	)		106,700			(48,918,168	)


Total stockholders’ deficiency		(4,640,859	)		133,861			(4,506,998	)


Total	$	278,423		$	—		$	278,423

F-20

JAG Media Holdings, Inc. and Subsidiaries
Restated Condensed Consolidated Balance Sheet (Unaudited)
January 31, 2007


	As Previously			Restatement
	Reported			Adjustment			As Restated
	1/31/2007			1/31/2007			1/31/2007
Assets

Current assets:
Cash and cash equivalents	$	21,617		$	—		$	21,617
Accounts receivable, net of allowance for doubtful accounts of $7,500		17,120						17,120
Other current assets		61,730						61,730


Total current assets		100,467			—			100,467

Equipment, net of accumulated depreciation of $136,988		73,058						73,058


Total	$	173,525		$	—		$	173,525


Liabilities and Stockholders’ Deficiency

Current liabilities:
Accounts payable and accrued expenses	$	466,229		$	—		$	466,229
Deferred revenues		21,520						21,520
Derivative liability		4,823,317			(192,532	)		4,630,785


Total current liabilities		5,311,066			(192,532	)		5,118,534

Convertible debentures payable, net of unamortized debt discount of $1,163,300		2,356,700						2,356,700


Total liabilities		7,667,766			(192,532	)		7,475,234


Mandatorily redeemable Class B common stock; par value $.00001 per share: 400,000 shares designated as Series 2: 381,741 shares issued and outstanding		4						4

40,000 shares designated as Series 3; 21,500 shares issued and outstanding		—						—


		4						4


Commitments and contingencies

Stockholders’ deficiency:
Preferred stock; par value $.00001 per share; 50,000,000 shares authorized, none issued
Common stock; par value $.00001 per share; 500,000,000 shares authorized; 47,508,617 shares issued and outstanding		475						475
Additional paid-in capital		44,807,468			239,106			45,046,574
Accumulated deficit		(52,302,188	)		(46,574	)		(52,348,762	)


Total stockholders’ deficiency		(7,494,245	)		192,532			(7,301,713	)


Total	$	173,525		$	—		$	173,525

F-22

JAG Media Holdings, Inc. and Subsidiaries
Restated Condensed Consolidated Balance Sheet (Unaudited)
April 30, 2007


	As Previously			Restatement
	Reported			Adjustment			As Restated
	4/30/2007			4/30/2007			4/30/2007
Assets

Current assets:
Cash and cash equivalents	$	5,598		$	—		$	5,598
Accounts receivable, net of allowance for doubtful accounts of $7,500		30,959						30,959
Other current assets		26,042						26,042


Total current assets		62,599			—			62,599

Equipment, net of accumulated depreciation of $146,127		63,919						63,919


Total	$	126,518		$	—		$	126,518


Liabilities and Stockholders’ Deficiency

Current liabilities:
Accounts payable and accrued expenses	$	936,102		$	—		$	936,102
Deferred revenues		21,630						21,630
Derivative liability		5,114,349			(213,891	)		4,900,458


Total current liabilities		6,072,081			(213,891	)		5,858,190

Convertible debentures payable, net of unamortized debt discount of $1,038,060		2,481,940						2,481,940


Total liabilities		8,554,021			(213,891	)		8,340,130


Mandatorily redeemable Class B common stock; par value $.00001 per share: 400,000 shares designated as Series 2: 381,741 shares issued and outstanding		4						4

40,000 shares designated as Series 3; 21,500 shares issued and outstanding		—						—


		4						4


Commitments and contingencies

Stockholders’ deficiency:
Preferred stock; par value $.00001 per share; 50,000,000 shares authorized, none issued
Common stock; par value $.00001 per share; 500,000,000 shares authorized; 47,708,617 shares issued and outstanding		477						477
Additional paid-in capital		44,934,199			412,606			45,346,805
Accumulated deficit		(53,362,183	)		(198,715	)		(53,560,898	)


Total stockholders’ deficiency		(8,427,507	)		213,891			(8,213,616	)


Total	$	126,518		$	—		$	126,518

F-24

JAG MEDIA HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
OCTOBER 31, 2007 AND JULY 31, 2007
(UNAUDITED)


	October 31,			July 31,
	2007			2007
	(unaudited)			(see note 1)
Assets
Current assets:
Cash and cash equivalents	$	138,002		$	507
Accounts receivable, net of allowance for doubtful accounts of $7,500		53,600			34,345
Other current assets		329,526			44,426


Total current assets		521,128			79,278

Equipment, net of accumulated depreciation of $162,425 and$154,975		47,621			55,071


Totals	$	568,749		$	134,349


Liabilities and Stockholders’ Deficiency
Current liabilities:
Accounts payable and accrued expenses	$	975,973		$	1,088,819
Deferred revenues		25,817			18,695
Derivative liability		9,069,300			11,058,561

Total current liabilities		10,071,090			12,166,075
Convertible debentures payable, net of unamortized debt discount of $787,580 and $912,820		1,132,420			2,607,180

Total liabilities		11,203,510			14,773,255


Mandatorily redeemable Class B common stock; par value $.00001 per share:
400,000 shares designated as Series 2; 381,749 shares issued and outstanding		4			4
40,000 shares designated as Series 3; 21,500 shares issued and outstanding
	—			—


		4			4


Commitments and contingencies
Stockholders’ deficiency:
Preferred stock; par value $.00001 per share; 50,000,000 shares authorized, none issued
Common stock; par value $.00001 per share; 500,000,000 shares authorized; 53,103,617 and 48,048,617 shares issued and outstanding		531			480
Additional paid-in capital		48,478,693			45,806,278
Accumulated deficit		(59,113,989	)		(60,445,668	)


Total stockholders’ deficiency		(10,634,765	)		(14,638,910	)


Totals	$	568,749		$	134,349

See Notes to Condensed Consolidated Financial Statements.

F-27

JAG MEDIA HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED OCTOBER 31, 2007 AND 2006
(UNAUDITED)


	2007			2006 (restated)
Operating activities:
Net income (loss)	$	1,331,679		$	(247,652	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation		7,321			9,018
Amortization of unearned stock-based compensation		3,300			9,233
Gain on change in value of derivative liability		(1,933,938	)		(492,951	)
Amortization of debt discount		125,240			369,098
Costs of the Company paid by potential merger partner		230,113			27,161
Effect of issuance of common stock in exchange for services		25,600			—
Amortization of deferred consulting costs		65,631			—
Changes in operating assets and liabilities:
Accounts receivable		(19,255	)		(5,380	)
Other current assets		9,313			(67,096	)
Accounts payable and accrued expenses		(112,831	)		2,001
Deferred revenues		7,122			(3,004	)


Net cash used in operating activities		(260,705	)		(399,572	)


Investing activities:
Equipment purchases		—			(15,545	)


Net cash used in investing activities		—			(15,545	)


Financing activities:
Issuance of common stock upon exercise of stock options		398,200			—


Net cash provided by financing activities		398,200			—


Net increase (decrease) in cash and cash equivalents		137,495			(415,117	)
Cash and cash equivalents, beginning of period		507			450,618


Cash and cash equivalents, end of period	$	138,002		$	35,501


Supplemental disclosure of noncash financing activities:

Noncash effect of convertible debentures converted to common stock	$	1,600,000		$	200,000

Receivable from consultant for options exercised	$	78,750

Fair value of fully-vested shares issued to consultant in exchange for services	$	70,400

Reclassification of derivative liability	$	55,323

Fair value of options issued for future services	$	240,179

See Notes to Condensed Consolidated Financial Statements.

F-30

Note 1 — Basis of presentation

In the opinion of our management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial position of JAG Media Holdings, Inc. (“JAG Media”) and its subsidiaries as of October 31, 2007 (unaudited) and July 31, 2007, their results of operations for the three months ended October 31, 2007 and 2006 (restated), cash flows for the three months ended October 31, 2007 and 2006 and changes in stockholders’ deficiency for the three months ended October 31, 2007. JAG Media and its subsidiaries are referred to together herein as the “Company.” Pursuant to rules and regulations of the Securities and Exchange Commission (the “SEC”), certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted from these consolidated financial statements unless significant changes have taken place since the end of the most recent fiscal year. Accordingly, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements, notes to consolidated financial statements and the other information in the audited consolidated financial statements of the Company as of July 31, 2007 and 2006 and for the years ended July 31, 2007, 2006 and 2005 (the “Audited Financial Statements”) included elsewhere in this Consent Solicitation/Prospectus.

The results of the Company’s operations for the three months ended October 31, 2007 are not necessarily indicative of the results of operations to be expected for the full year ending July 31, 2008.

As further explained in Note 1 to the Audited Financial Statements, the Company gathers and compiles financial and investment information from contacts at financial institutions and other Wall Street professionals and generates revenues by releasing such information to subscribers in a consolidated format on a timely basis through facsimile transmissions and a web site. As a result of an acquisition on November 24, 2004 (see Note 5 to the Audited Financial Statements), the Company is also in the business of developing related software focused on streaming video solutions. Development of these products has been limited as a result of the Company’s lack of financial resources. The business acquired had not generated any significant revenue as of the date of the acquisition or through October 31, 2007.

The Company is actively pursuing potential mergers. As further discussed in Note 10 to the Audited Financial Statements, on December 27, 2005, the Company entered into an agreement and plan of merger that has been amended on various dates through November 13, 2007, (the “Merger Agreement”) with, among others, Cryptometrics, Inc., a Delaware corporation (“Cryptometrics”), pursuant to which Cryptometrics would merge with a newly created subsidiary of the Company. In consideration of the merger, the stockholders of Cryptometrics would acquire shares of common stock of the Company, which would, upon issuance, represent 89.66% of the outstanding shares of the common stock of the combined companies in exchange for all of the issued and outstanding shares of common stock of Cryptometrics. There is no assurance that the proposed transaction will be consummated.

The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. However, as shown in the accompanying condensed consolidated financial statements, the Company only generated revenues of approximately $37,000, and it incurred losses from operations of approximately $412,000 and cash flow deficiencies from operating activities of approximately $261,000 for the three months ended October 31, 2007. In addition, as of October 31, 2007, the Company only had cash and cash equivalents available of approximately $138,000 and it had a working capital deficiency of approximately $9,550,000. These matters raise substantial doubt about the Company’s ability to continue as a going concern.

F-31

Note 1 — Basis of presentation (continued)

Management believes that, in the absence of a substantial increase in subscription revenues, it is probable that the Company will continue to incur losses and negative cash flows from operating activities through at least October 31, 2008 and that the Company will need to obtain additional equity or debt financing to sustain its operations.

Management believes that the Company will be able to obtain sufficient financing directly through the consummation of the merger with Cryptometrics or through consummation of a merger with another appropriate merger candidate that has such financing, to enable it to continue as a going concern through at least October 31, 2008. However, if the Company cannot obtain sufficient additional financing by that date, the Company may be forced thereafter to restructure its operations, file for bankruptcy or entirely cease its operations.

The accompanying condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Note 2 — Net earnings (loss) per share

The Company presents “basic” earnings (loss) per share and, if applicable, “diluted” earnings per share pursuant to the provisions of Statement of Financial Accounting Standards No. 128, “Earnings per Share”. Basic earnings (loss) per share is calculated by dividing net income or loss by the weighted average number of common shares outstanding during each period. The calculation of diluted earnings per share is similar to that of basic earnings per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if all potentially dilutive common shares, such as those issuable upon the exercise of outstanding stock options and warrants and the conversion of outstanding convertible debentures were issued during the period and the treasury stock method had been applied to the proceeds from the exercise of the options and warrants and net income or loss was adjusted for interest on the convertible debentures.

As of October 31, 2007, there were stock options, warrants and convertible debentures outstanding for the purchase of a total of 750,000, 12,000,000 and 4,050,000 shares of common stock, respectively (see Notes 4 and 5 herein). The table below presents the computation of basic and diluted earnings per common share for the three months ended October 31, 2007:

Basic earnings per share computation


	Three Months Ended
	October 31, 2007
Numerator:
Net income	$	1,331,679

Denominator:
Basic weighted average common shares outstanding		50,666,552

Basic net income per share	$	0.03

F-32

Diluted earnings per share computation


	Three Months Ended
	October 31, 2007
Numerator:
Net income as reported	$	1,331,679
Add: Interest expense on convertible debentures		64,868
Debt discount on convertible debentures		125,240
Deduct: Gain on change in value of derivative liability attributable to options and warrants issued to non-employees assumed to have been exercised at the beginning of period		(1,933,938	)

Net loss, as adjusted	$	(412,151	)

Denominator:
Basic weighted average common shares outstanding		50,666,552
Incremental shares from assumed conversion:

Exercise of stock options		731,264
Exercise of warrants		2,632,207
Conversion of convertible debt		4,050,000

Diluted weighted average common shares		58,080,023

Diluted net loss per share	$	(0.01	)

However, diluted per share amounts presented in the accompanying condensed consolidated statements of operations for the three months ended October 31, 2006 are the same as basic per share amounts because the Company had a net loss in the three months ended October 31, 2006 and the assumed effects of the exercise of the Company’s stock options and warrants and the conversion of convertible debentures that were outstanding during all or part of those periods would have been anti-dilutive.

Note 3 — Income taxes

As of October 31, 2007, the Company had federal net operating loss carry forwards of approximately $35,759,000 available to reduce future federal taxable income which will expire from 2019 through 2027.

As of October 31, 2007, the Company’s deferred tax assets consisted of the effects of temporary differences attributable to the following:


Deferred revenues, net	$	9,000
Unearned compensation		20,000
Net operating loss carryforwards		13,443,000

		13,472,000

Less valuation allowance		(13,472,000	)

Total	$	—

The Company had also offset the potential benefits from its net deferred tax assets by an equivalent valuation allowance during the year ended July 31, 2007. As a result of increases in the valuation allowances of $173,000 and $208,000, during the three months ended October 31, 2007 and 2006, respectively, which were primarily attributable to the net income or loss incurred during each of those periods there are no provisions or credits for income taxes reflected in the accompanying condensed consolidated statements of operations to offset pre-tax income or losses.

F-33

Note 4 — Equity and debt financing agreements with YA Global Investments, L.P.:

As further explained in Note 4 to the Audited Financial Statements, on April 9, 2002, the Company entered into an equity line purchase agreement (the “Equity Line Agreement”) with YA Global Investments, L.P. (“YA Global”)(formerly known as Cornell Capital Partners, L.P.) pursuant to which the Company had, in effect, put options whereby, subject to certain conditions, it could have required YA Global to purchase shares of its common stock from time to time at an aggregate purchase price of $10,000,000 through August 2006. The purchase price was to be 95% of the lowest closing bid price of the Company’s common stock over a specified number of trading days commencing on specified dates. YA Global was entitled to a cash fee equal to 5% of the gross proceeds received by the Company from YA Global in connection with each put. As of May 25, 2006, the date the Equity Line Agreement was effectively cancelled, $4,035,000 of the Company’s Equity Line with YA Global had been utilized.

On January 25, 2005, the Company entered into a Promissory Note Agreement with YA Global for a loan of $2,000,000. The $2,000,000 loan from YA Global was funded on February 2, 2005 net of a debt discount of $100,000 deducted at the time of funding which is being amortized over the original term of the loan. The unamortized debt discount was approximately $32,000 as of May 25, 2006 when a promissory note was converted into common stock and a secured convertible debenture. The face amount of the promissory note and interest on the amount from time to time outstanding at a rate of 12% per year was originally payable either (i) out of the net proceeds to be received by the Company upon delivery of put notices under the Equity Line Agreement or (ii) in full by the Company within 663 calendar days, subsequently extended to 753 calendar days, of January 25, 2005 regardless of the availability of proceeds under the Equity Line Agreement, unless an extension was mutually agreed to by the parties in writing.

Pursuant to the promissory note, the Company had agreed to deposit in escrow 35 put notices under the Equity Line Agreement for puts in an amount of $60,000 each and one request for a put under the Equity Line Agreement in an amount of $181,017. Under the terms of the promissory note as amended on August 5, 2005, the put notices were to have been held in escrow and released every 14 days commencing November 4, 2005.

All put notices were returned to the Company on May 25, 2006, when the Company terminated its Equity Line with YA Global, converted $250,000 of the principal of its $2,000,000 promissory note payable to YA Global into 1,250,000 shares of the Company’s common stock which were issued on such date for which the fair value was $400,000, and converted the remaining principal amount of $1,750,000 and accrued interest of $150,000 on the promissory note into a secured convertible debenture in the principal amount of $1,900,000. In addition, the Company issued similar secured convertible debentures to YA Global in the principal amounts of $1,250,000 on May 25, 2006 and $1,000,000 on May 31, 2006, which provided the Company with net proceeds of approximately $2,025,000 after fees and costs of $225,000 paid to YA Global which were recorded as part of the debt discount on the debentures. All the secured convertible debentures bear interest at the rate of 10% per year and mature three years after issuance. They are convertible through maturity into shares of the Company’s common stock as described below.

YA Global had the right to convert the debentures, at its sole option, into shares of the Company’s common stock at a conversion price which was the lower of (i) $0.40 per share or (ii) a 10% discount to the lowest volume weighted average price, as reported by Bloomberg L.P, of the Company’s common stock during the 30 trading days prior to the conversion date (see Note 7 herein).

F-34

In connection with the foregoing May 25, 2006 transaction, the Company issued warrants to YA Global to purchase 12,000,000 shares of common stock. The warrants are exercisable through May 2011 at prices ranging from $0.40 to $0.80 per share (see Note 6 to the Audited Financial Statements, and Note 7 herein). The exercise price and number of shares issuable pursuant to each of the warrants are subject to antidilution provisions.

Since the conversion of the secured convertible debentures could have resulted in the issuance of an indeterminable number of common shares because they were convertible at a discount from the market price, the Company determined that based on the guidance in the consensus for EITF Issue No. 00-19 (“EITF 00-19”) “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in a Company’s Own Stock”, the Company was prohibited from concluding that it would have a sufficient number of authorized and unissued shares to net -share settle any of those warrants or any other warrants or options previously issued or granted to non-employees. Therefore, as of the date the secured convertible debentures and the related warrants were initially issued, the Company recorded the related fair value of all warrants issued with the debentures and options previously issued to non-employees as a liability as explained below. Subsequent changes in the fair value of such options and warrants at the end of each reporting period will be recorded as charges or credits to the Company’s results of operations.

As of July 31, 2006, the warrants for the purchase of 12,000,000 shares were valued at approximately $2,744,000 based on the Black-Scholes option pricing model assuming a risk free interest rate of 6% annually, no dividend payments, annual volatility of 338.441%, exercise prices ranging from $0.40 to $0.80 per share, and the stock price of $0.23 per share when valued. As of October 31, 2006, the fair value of the warrants was recalculated using the Black-Scholes option pricing model assuming a risk free interest rate of 6% annually, no dividend payments, annual volatility of 229.281%, exercise prices ranging from $0.40 to $0.80 per share, and the stock price of $0.20 per share when valued. This resulted in a decrease in the carrying value of the derivative liability of the warrants to approximately $2,253,000 and the recognition of unrealized gain on derivative liability of approximately $491,000 during the three months ended October 31, 2006.

As of July 31, 2007, the warrants for the purchase of 12,000,000 shares were valued at approximately $11,059,000 based on the Black-Scholes option pricing model assuming a risk free interest rate of 6% annually, no dividend payments, annual volatility of 216.543%, exercise prices ranging from $0.40 to $0.80 per share, and the stock price of $0.95 per share when valued. As of October 31, 2007, the fair value of the warrants was recalculated using the Black-Scholes option pricing model assuming a risk free interest rate of 6% annually, no dividend payments, annual volatility of 209.285%, exercise prices ranging from $0.40 to $0.80 per share, and the stock price of $0.82 per share when valued. This resulted in a decrease in the carrying value of the derivative liability of the warrants to approximately $9,069,000 and the recognition of unrealized gain on derivative liability of approximately $1,989,000 during the three months ended October 31, 2007.

The issuance of convertible debentures and warrants to YA Global also caused the Company to reclassify the fair value of 200,000 options issued to a consultant that were outstanding as of May 25, 2006 from stockholders’ equity to the derivative liability and include the fair value of all options and warrants subsequently granted to non-employees for services as a derivative liability until the options and warrants are exercised or expire. As of July 31, 2006, the outstanding options granted to the consultant were valued at approximately $46,000 using the Black-Scholes option pricing model. On October 2, 2006, the Company granted options to another consultant with a fair value at the date of grant of approximately $36,000 which is being amortized over the service period. The fair value at the date of the grant was determined using the Black-Scholes option pricing model assuming a risk free interest rate of 6% annually, no dividend payments, annual volatility of 231.079%, an exercise price of $0.05 per share, and the stock price of $0.18 per share when issued. As of October 31, 2006, the fair value of all options granted to non-employees was recalculated using the Black-Scholes option pricing model and the assumptions used for the valuation of the warrants described above. As a result, the Company recognized a derivative liability of $82,000 for the approximate fair value of non-employee options as of October 31, 2006, and unrealized gain on derivative liability of $4,000 for the net change in the fair value of options from July 31, 2006 and October 2, 2006 through October 31, 2006.

F-35

During the three months ended October 31, 2007 and 2006, respectively, YA Global converted debentures in the principal amounts of $1,600,000 and $200,000 into 4,000,000 and 1,683,083 shares of the Company’s common stock. The Company recorded amortization of debt discount attributable to the debentures of approximately $125,000 and $369,000 during the three months ended October 31, 2007 and 2006, respectively, including $0 and $200,000 which was accreted as a result of the conversions. As of October 31, 2007, the debentures had a net carrying value of approximately $1,132,000, reflecting the remaining outstanding principal balance due of $1,920,000 reduced by remaining unamortized debt discounts aggregating approximately $788,000.

From November 1 through January 30, 2008, YA Global converted debentures in the principal amount of $1,595,000 into 3,987,500 shares of the Company’s common stock. On January 31, 2008, JAG Media entered into a new letter agreement with YA Global pursuant to which YA Global on January 31, 2008 converted the remaining outstanding principal amount of $325,000 of JAG Media’s convertible debentures, as well as all accrued interest on such debentures, into 2,151,699 shares of JAG Media’s common stock and exercised a warrant for 700,000 shares of JAG Media’s common stock, providing Jag Media with $280,000 in cash proceeds. In addition, such new letter agreement amended the outstanding warrants to purchase 11,300,000 shares of JAG Media Common Stock so that their respective first exercise dates will be 30 trading days following the Closing of the Merger, March 31, 2008, June 30, 2008, September 30, 2008 and December 31, 2008 and amended the exercise price of the warrants to be 88% of the average of the Volume Weighted Average Price of JAG Media’s common stock as quoted by Bloomberg during the 30 days immediately prior to the first date upon which each warrant may be exercised. Such amendments to the warrants will become ineffective on February 27, 2008 if the Closing of the Merger has not yet occurred by that date, unless the parties agree to extend such date.

Note 5 — Issuances of common stock and stock options and other equity transactions

Shares issued for services:

As explained in Note 6 to the Audited Financial Statements, the Company has issued, from time to time, common stock to employees as compensation and to non-employees, including investment analysts and commentators and other consultants that have entered into agreements to provide the Company with financial information that is released to subscribers, as consideration for consulting, professional and other services.

During the three months ended October 31, 2007, the Company issued a total of 150,000 shares of its common stock with an aggregate fair value of $96,000 to certain employees and consultants of which $25,600 was charged to general and administrative expense and $70,400 was recorded as other current assets and will be charged to general and administrative expense over the period in which the services are rendered.

Options issued for services:

As explained in Note 6 to the Audited Financial Statements, the Company has issued, from time to time, stock options for the purchase of common stock to employees as compensation and to non-employees, including investment analysts and commentators and other consultants that have entered into agreements to provide the Company with financial information that is released to subscribers, as consideration for consulting, professional and other services.

As of October 31, 2007, the Company has options outstanding for the purchase of 750,000 shares of, effectively, common stock all of which were granted pursuant to the Company’s 1999 Long-term Incentive Plan (the “Incentive Plan”) which provides for individual awards to officers, employees, directors, consultants and certain other individuals that may take the form of stock options and certain other types of awards for which the value is based in whole or in part upon the fair market value of, the Company’s common stock. The number of shares of common stock that may be subject to all types of awards under the Incentive Plan as amended may not exceed 6,000,000 shares. The options typically vest upon grant but in no case later than two and one-half years after grant and expire the

F-36

earlier of the tenth anniversary of the grant or the 90th day following termination of employment; provided that during such 90 day period the option will be exercisable only to the extent it was vested as of the date of such termination.

As explained in Note 2 to the Audited Financial Statements, through July 31, 2006, the Company recognized the cost of grants of options to employees and non-employees based on the fair value of the equity instruments at the date issued amortized over the periods in which the related services were rendered in accordance with the provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”). Accordingly, the Company had been estimating the fair value of stock options using an option-pricing model (generally, the Black-Scholes model) that meets the criteria set forth in SFAS 123 and common stock using its market value. It has been recording such value through charges to compensation cost and corresponding credits to equity. The charges to compensation cost are being amortized to expense over the vesting period. As required, effective August 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (Revised 2004), “Share-Based Payment” (“SFAS 123(R)”) using the modified prospective application transition method. Because the fair value recognition provisions of SFAS No. 123 and SFAS No. 123(R) are materially consistent, the adoption of SFAS No. 123(R) did not have a significant impact on the methods used by the Company to value and account for its options or its financial position and results of operations. In accordance with SFAS No. 123(R), the Company reclassified previously unamortized unearned compensation of $34,870 from unearned compensation to additional paid-in capital as of the date of adoption. There was no charge to operations.

During the three months ended October 31, 2007, the Company issued options for the purchase of 655,000 shares of common stock to non-employees valued at approximately $240,179 based on the Black-Scholes option pricing model assuming a risk free interest rate of 6% annually, no dividend payments, annual volatility ranging from 210.949% to 216.543%, and exercise prices ranging from $0.60 to $0.86 per share when issued.

During the three months ended October 31, 2007, YA Global converted debentures in the principal amount of $1,600,000 into 4,000,000 shares of the Company’s common stock.

During the three months ended October 31, 2007, consultants to the company exercised options to purchase 905,000 shares of common stock at prices ranging from $0.02 to $0.86. Proceeds of $78,750 for the exercise of options to purchase 125,000 shares of common stock at $.063 per share were not received until November 14, 2007 and, accordingly, the balance receivable was included in other current assets at October 31, 2007. The Company received proceeds of $398,200 upon the exercise of options to purchase 780,000 shares of the Company’s common stock at prices ranging from $0.02 to $0.86 during the three months ended October 31, 2007. As a result of the exercise of the options, the Company reclassified $295,502 from derivative liability to additional paid-in capital.

As of October 31, 2007, the Company has the ability to issue options to purchase an additional 5,250,000 shares of common stock under the Incentive Plan.

F-37

The table below summarizes the stock option activity pursuant to our Incentive Plan for the three months ended October 31, 2007:


						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic
	Shares			Price		Term		Value
Options outstanding August 1, 2007		1,000,000		$	0.02
Granted		655,000		$	0.68
Exercised		(905,000	)	$	0.49

Options outstanding at end of period		750,000		$	0.02		3.84	$	600,000

Options exercisable at end of period		750,000		$	0.02		3.84	$	600,000

The fair value of each option granted by the Company in the three months ended October 31, 2007 and 2006 was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:


	Three Months Ended			Three Months Ended
	October 31, 2007			October 31, 2006
Risk-free interest rate		6.00	%		6.00	%
Dividend yield		0	%		0	%
Expected life	3 months			5 years
Expected volatility factor	210.949% to 216.543%				231.079	%

As of October 31, 2007, approximately $1,000 of expense related to such options has yet to be recognized.

Other Equity Transactions

As explained in Notes 1 and 7 herein, the Company entered into a Merger Agreement with, among others, Cryptometrics. Pursuant to the terms of the merger, Cryptometrics has paid various legal and accounting costs, totaling approximately $810,000 on behalf of the Company, including approximately $230,000 in the three months ended October 31, 2007, that will not have to be repaid by the Company to Cryptometrics in the event that the merger is not successfully completed. The costs paid by Cryptometrics have been charged to operating expenses and the amounts received by the Company have been recorded as a capital contribution and included in additional paid-in capital.

Note 6 — Litigation

The Company is a party to various claims and lawsuits incidental to its business. In the opinion of management, it is probable that the resolution of such contingencies will not materially affect the consolidated financial position or results of operations of the Company in subsequent years.

F-38

Note 7 — Cryptometrics merger

As explained in Notes 1 and 10 to the Audited Financial Statements and Note 1 herein, the Company entered into a Merger Agreement on December 27, 2005, which has been amended on various dates through February 6, 2008, with, among others, Cryptometrics pursuant to which Cryptometrics would merge with a newly created subsidiary of the Company. In consideration of the merger, the stockholders of Cryptometrics would acquire shares of common stock of the Company, which would, upon issuance, represent approximately 87% of the combined companies’ outstanding shares of common stock, in exchange for all of the issued and outstanding shares of common stock of Cryptometrics. The shares of common stock to be received by the stockholders of Cryptometrics are being registered under the U.S. Securities Act of 1933, as amended. If consummated, the proposed transaction would be accounted for as a reverse acquisition in which Cryptometrics would be the acquirer for accounting purposes.

At the closing of the proposed transaction, the Company’s current directors would resign as directors of the Company and would also resign as officers and executives of the Company. The Company’s board of directors would be replaced with designees of Cryptometrics.

Until the Company and Cryptometrics agree otherwise, the Merger Agreement, notwithstanding approval by the Cryptometric’s stockholders, may be cancelled with or without any reason at any time by either of them with no liability.

In addition the proposed transaction is still subject to various conditions being satisfied prior to closing, including, among others, (i) the representations and warranties of the parties being true and correct, (ii) the Company’s common stock having been authorized for trading on the OTC Bulletin Board or the OTC Pink Sheets, or the Nasdaq Capital Market, and (iii) the Company’s indebtedness not exceeding $4,350,000.

There is no assurance that the Company or Cryptometrics will not cancel the Merger Agreement, that the conditions of the proposed transaction will be fulfilled and that the proposed transaction between the Company and Cryptometrics will be consummated. The Merger Agreement has an automatic termination date which the parties to it have extended from time to time, but they are under no obligation to do so. As explained in Notes 1 and 6 to the Audited Financial Statements, pursuant to the terms of the Merger Agreement, Cryptometrics has paid various legal and accounting costs on behalf of the Company that will not have to be repaid by the Company to Cryptometrics in the event that the merger is not successfully completed. The costs paid by Cryptometrics have been charged to operating expenses and the amounts received by the Company have been recorded as a capital contribution and included in additional paid-in capital. In addition, in consideration of $167,660 of such advances during the year ended July 31, 2007, the Company granted a non-exclusive, perpetual, royalty free license to Cryptometrics to use certain of the intellectual property of its subsidiary, Pixaya (UK) Limited. The Company has agreed to pay its own expenses in the future.

In connection with the proposed merger, on various dates from January 24, 2007 through November 13, 2007, the secured convertible debentures and warrants issued to YA Global were amended. As a result, on the date the proposed merger between the Company and Cryptometrics closes and becomes effective, (i) Cryptometrics will assume all of the rights and obligations under those amended agreements on behalf of the post-merger, combined company, and (ii) the secured convertible debentures would become convertible at a discount of 5% to the lowest volume weighted average price of the Company’s common stock during the 30 trading days prior to the conversion date and the warrants issued to YA Global would become convertible at a discount of 12% to the average of the volume weighted average price of the Company’s common stock during the 30 trading days prior to the exercise date.

F-39

Note 8 — Restatement of Unaudited Interim Financial Statements

In connection with the preparation of the Annual Report on Form 10-K of the Company for the fiscal year ended July 31, 2007, the Company’s independent registered public accounting firm brought to the attention of the management of the Company that certain of the Company’s legal and accounting costs which, pursuant to the terms of the Merger Agreement with Cryptometrics were paid for by Cryptometrics, should have been charged to operating expenses and the amounts received by the Company should have been recorded as capital contributions and included in additional paid-in capital in the periods in which the costs were incurred (see Notes 6 and 11 to the Audited Financial Statements). As a result, management completed an investigation focused on the Company’s accounting for all expenses paid for by Cryptometrics during the term of the Merger Agreement and determined that certain of the expenses should have been recorded in each of the quarters ended October 31, 2006, January 31, 2007 and April 30, 2007.

In addition, the Company’s independent registered public accounting firm brought to the attention of the management of the Company that the expected volatility factors used to determine the fair value of the derivative liabilities that were valued based on the Black-Scholes options pricing model were overstated during each of the first three quarters of the year ended July 31, 2007. As a result, management completed an investigation and determined that the volatility factors should have ranged from 223.697% to 229.281% instead of the 340.64% to 370.96% and, accordingly, the derivative liabilities recorded at the end of each of the quarters ended October 31, 2006, January 31, 2007 and April 30, 2007 were overstated and the gain or loss on change in derivative liability for each of the quarters then ended was understated or overstated.

Upon completion of these investigations, management has identified certain adjustments related to the costs paid by Cryptometrics on behalf of the Company and the overstatement of the volatility factors that necessitate the restatement of the Company’s financial statements for each of the first three quarters of fiscal 2007. Previously issued financial statements for those quarters should not be relied upon. The following tables reflect the impact of the restatements for the quarter ended October 31, 2006.

F-40

JAG Media Holdings, Inc. and Subsidiaries

Restated Condensed Consolidated Balance Sheet

October 31, 2006


	As Previously			Restatement
	Reported			Adjustment			As Restated
	10/31/2006			10/31/2006			10/31/2006
Assets
Current assets:
Cash and cash equivalents	$	35,501		$	—		$	35,501
Accounts receivable, net of allowance for doubtful accounts of $7,500		20,960						20,960
Other current assets		138,748						138,748


Total current assets		195,209			—			195,209

Equipment, net of accumulated depreciation of $127,798		83,214						83,214


Total	$	278,423		$	—		$	278,423


Liabilities and Stockholders’ Deficiency
Current liabilities:
Accounts payable and accrued expenses	$	236,987		$	—		$	236,987
Deferred revenues		19,444						19,444
Derivative liability		2,466,660			(133,861	)		2,332,799


Total current liabilities		2,723,091			(133,861	)		2,589,230

Convertible debentures payable, net of unamortized debt discount of $1,678,813		2,196,187						2,196,187


Total liabilities		4,919,278			(133,861	)		4,785,417


Mandatorily redeemable Class B common stock; par value $.00001 per share: 400,000 shares designated as Series 2: 381,014 shares issued and outstanding		4						4

40,000 shares designated as Series 3; 21,500 shares issued and outstanding
	—						—

		4						4


Commitments and contingencies

Stockholders’ deficiency:
Preferred stock; par value $.00001 per share; 50,000,000 shares authorized, none issued
Common stock; par value $.00001 per share; 500,000,000 shares authorized; 44,579,589 shares issued and outstanding		446						446
Additional paid-in capital		44,383,563			27,161			44,410,724
Accumulated deficit		(49,024,868	)		106,700			(48,918,168	)


Total stockholders’ deficiency		(4,640,859	)		133,861			(4,506,998	)


Total	$	278,423		$	—		$	278,423

F-41

REPORT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders’ and
Board of Directors
Cryptometrics, Inc & subsidiary

We have audited the accompanying consolidated balance sheets of Cryptometrics, Inc. & subsidiary as of April 30, 2007 and 2006 and the related consolidated statements of operations, change in stockholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit included 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 financial statement presentation. We believe the 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 financial position of Cryptometrics, Inc. & subsidiary as of April 30, 2007 and 2006, and the result of its operation and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Seligson & Giannattasio, LLP
White Plains, NY
August 17, 2007, except for notes 2 and 12
which date is October 17, 2007

F-44

CRYPTOMETRICS, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS


	Year Ended			Year Ended
	April 30, 2007			April 30, 2006
	(as restated)
Cash flows from operating activities:
Net loss	$	(9,593,733	)	$	(6,929,981	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		322,343			244,516
Gain on change in derivative liability		(19,944	)
Amortization of deferred finance fees		336,170
Changes in assets and liabilities:
Accounts receivable		(82,618	)		37,174
Inventories		(40,624	)		(2,779	)
Prepaid expenses and other assets		62,037			(44,895	)
Investment tax credits recoverable		(148,553	)		176,607
Accounts payable and accrued expenses		(144,414	)		(451,512	)


Net cash flows used in operating activities		(9,309,336	)		(6,970,870	)


Cash flows from investing activities:
Acquisition of fixed assets		(306,560	)		(444,806	)
Investment in related party		(575,000	)
Sale (Purchase) of short-term investments		523,015			(3,144,681	)
Patent application costs		(192,746	)		(108,443	)


Net cash flows from investing activities		(551,291	)		(3,697,930	)


Cash flows from financing activities:
Sale of common stock		105,000			6,908,800
Issuance of Convertible debt		12,000,000			—
Issuance costs		(930,931	)		—


Net cash flows from financing activities		11,174,069			6,908,800


Net effect of currency fluctuations		120,451			97,909


Net change in cash and cash equivalents		1,433,893			(3,662,091	)

Cash and cash equivalents at period beginning		7,520,056			11,182,147


Cash and cash equivalents at period end	$	8,953,949		$	7,520,056


Supplemental cash flow information:
Income taxes paid	$	—		$	—

Interest paid	$	443,564		$	—

See notes to accompanying consolidated financial statements.

F-49

CRYPTOMETRICS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2007

Note 1. Organization and Summary of Significant Accounting Policies

Organization

Cryptometrics, Inc. (the “Company”) is a provider of biometric solutions for critical infrastructure and key asset protection. The Company provides both hardware and software solutions focusing on biometric identification and verification both domestically and internationally. The FingerSURE product line provides encryption software, allowing users of both trusted and non-trusted authentication devices the ability to, in a secure manner to verify identity via a finger print. The SecurIDent product line contains proprietary software products/solutions that possess image quality analysis, eye finding logic, image normalization and matching. From a hardware prospective the Company provides its various biometric smart cameras utilizing off the shelf casings, sensors and lens; configured utilizing intellectual property and providing live capture images that are suitable for facial recognition. This technology is applied and utilized by Border Patrols, Immigration Authorities, and various governmental and non-governmental agencies.

The Company was incorporated in the State of Delaware in May 2000 under the name Postal Hut, Inc. In November 2001, the Company changed its name to Cryptometrics, Inc.

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Cryptometrics Canada, Inc. All material intercompany transactions have been eliminated in consolidation.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts therein. Estimates are used for, but not limited to, the accounting for the allowance for doubtful accounts and sales returns, goodwill and other intangible asset impairments, inventory allowances, warranty costs, revenue recognition as well as loss contingencies and restructurings. Actual results could differ from these estimates.

Accounts Receivable

Based on the Company’s customer base and experience, the Company has not had material bad debts and therefore does not provide for an allowance for doubtful accounts, but expenses bad debts in the period of determination as to collectibility. Accounts receivable consists of the following at April 30:


	2007		2006
Billed	$	92,978	$	60,360

Unbilled		50,000		—


	$	142,978	$	60,360

F-50

CRYPTOMETRICS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2007

Note 1. Organization and Summary of Significant Accounting Policies (continued)

Revenue Recognition Policy

Significant management judgments and estimates are made in connection with the revenues recognized in any accounting period. The Company must assess whether the fee associated with a revenue transaction is fixed or determinable and whether or not collection is probable. Material differences could result in the amount and timing of revenues for any period if management were to make different judgments or utilize different estimates.

Certain of the Company’s equipment sales such as its’ SecurIDent Systems generally require installation subsequent to shipment and transfer of title. The Company recognizes revenue on such sales in accordance with Staff Accounting Bulletin (“SAB”) 104, “Revenue Recognition”. Revenue related to equipment sales that are contingent on installation is deferred until installation is complete, title has transferred and customer acceptance has been obtained. The Company considers acceptance of the SecurIDent Systems contingent upon successful installation of the product. Revenues from sales of products via authorized representatives, dealers, distributors or other third party sales channels are recognized at the time of title transfer, generally upon shipment.

The Company also sells several stand-alone software products including Face Recognition Server, Face Processor and software developer kits. Revenue is recognized on software products in accordance with Statement of Position (“SOP”) 97-2, “Software Revenue Recognition,” as amended. The Company recognizes revenue on software products when persuasive evidence of an arrangement exists, delivery has occurred, the vendor’s fee is fixed or determinable and vendor-specific objective evidence (“VSOE”) of fair value exists to allocate the total fee to all undelivered elements of the arrangement and collection is deemed reasonably assured. VSOE of fair value is established based upon either sales of the element (e.g., maintenance, training or consulting) in individual transactions, or, in certain cases for maintenance, based upon substantive renewal rates. In cases where the Company does not have VSOE of fair value for all delivered elements in the transaction (e.g., for licenses), the fees from these multiple-element agreements are allocated using the residual value method. In circumstances when the software and services being sold include services to provide significant production, modification or customization of the software, and the services cannot be segregated into separate units of accounting, the Company accounts for the software sales under SOP 97-2 and SOP 81-1 “Accounting for performance of construction-type and certain production-type contracts”. In the cases where SOP 81-1 is applied, the Company uses the cost-to-cost percentage of completion method. Under this method, sales, including estimated earned fees or profits, are recorded based on the percentage that total costs incurred bear to total estimated costs. Maintenance revenue is deferred and recognized ratably over the life of the service period of the related agreement.

F-51

CRYPTOMETRICS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2007

Note 1. Organization and Summary of Significant Accounting Policies (continued)

Stock-Based Compensation

In October 1995, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock-Based Compensation”. The Company currently accounts for its stock-based compensation plans using the accounting prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”. Prior to November 1, 2005, the Company was not required to adopt the fair value based recognition provisions prescribed under SFAS No. 123, as amended, and elected only to comply with the disclosure requirements set forth in the statement which includes disclosing pro forma net income (loss) and earnings (loss) per share as if the fair value based method of accounting had been applied. For periods subsequent to November 1, 2005, the Company is required to report the fair value of each option grant as a component of operating expense.

The effects of applying SFAS No. 123, as amended, in the above pro forma disclosures are not indicative of future amounts as they do not include the effects of awards granted prior to Fiscal 1996. Additionally, future amounts are likely to be affected by the number of grants awarded since additional awards are generally expected to be made at varying amounts.

During the year ended April 30, 2005, the Company granted options to certain of its employees to purchases 180,000 shares of the Company’s common stock. The shares vest generally over a one-year period and can be exercised for ten years at an exercise price of $7 per share.

The pro forma net (loss) for the period prior to the adoption of SFAS No. 123(r) consists of the following:


	Fiscal year ended April 30,
	2007			2006
Net loss	$	(9,593,733	)	$	(6,929,981	)
Effect of stock options		—			(38,800	)


Proforma net loss	$	(9,593,733	)	$	(6,968,781	)

Proforma net loss per share	$	(.80	)	$	(.61	)

The Company has not provided for income taxes for the stock options as the likelihood of realization of the additional net operating losses is uncertain.

F-52

CRYPTOMETRICS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2007

Note 1. Organization and Summary of Significant Accounting Policies (continued)

Fixed Assets

Fixed assets are stated at cost. The Company provides for depreciation generally on a straight-line method by charges to income at rates based upon estimated recovery periods below. Cryptometrics Canada, Inc. provides for depreciation generally on the declining balance method by charges to income at rates based upon estimated recovery periods below.


Furniture		5 to 7 years
Computer equipment		3 to 5 years
Leasehold improvements		Remaining lease term or useful life

Income Taxes

The Company’s deferred income taxes are principally from the net operating losses and other timing differences. Income taxes are reported based upon Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes”.

Cryptometrics Canada, Inc. claims research and development deductions and related investment tax credits for income tax purposes based on management’s interpretation of the applicable legislation in the Income Tax Act of Canada. These claims are subject to audit by the Canada Revenue Agency and any resulting adjustments would reduce the investment tax credits in the year. Tax credits are accrued when the related corporate income tax returns are prepared and when certainty of collection is assured. These credits are treated as a reduction of research and development costs.

Marketing

Marketing and promotional costs are expensed as incurred and aggregated approximately $2,896,502 and $2,706,796 for the fiscal years ended April 30, 2007 and 2006, respectively.

Shipping

The Company classifies shipping costs as a component of selling expenses. Shipping costs were not material for the years ended April 30, 2007 and 2006.

Research and Development Costs

The Company expenses research and development costs as incurred. For research and development costs incurred in Canada, the Company claims research and development deductions and the related investment tax credits. These claims are subject to audit by the applicable tax authorities in Canada.

F-53

CRYPTOMETRICS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2007

Note 1. Organization and Summary of Significant Accounting Policies (continued)

Patents and Trademarks

Patents pending and trademarks are capitalized as costs are incurred. Patents are amortized over a useful life of fifteen years commencing in the year of approval. Trademarks are reviewed for impairment on an annual basis. The estimated amortizations for the Patents and Trademarks as of April 30, 2007 are as follows:


Year Ended
April 30,
2008	$	17,630
2009		17,630
2010		17,630
2011		17,630
2012 and thereafter		293,720

	$	364,240

Indemnification Arrangements and Product Warranties

From time to time, the Company agrees to indemnify its customers against liability if the Company’s products infringe a third party’s intellectual property rights. As of April 30, 2007, the Company was not subject to any pending litigation alleging that the Company’s products infringe the intellectual property rights of any third parties.

The Company offers a 90-day and one year warranty on various products and services. The majority of the warranty liability that the Company has recorded is due to one-year warranties. The Company estimates the costs that may be incurred under its warranties and records a liability in the amount of such costs at the time the product is sold. Factors that affect the Company’s warranty liability include the number of units sold, historical and anticipated rates of warranty claims and cost per claim.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable. The Company maintains substantially all its cash balances in a limited number of financial institutions. The balances in the United States are insured by the Federal Deposit Insurance Corporation up to $100,000. At April 30, 2007 and 2006, the Company’s uninsured cash balances totaled $8,753,949 and $7,322,734, respectively.

The Company had one customer in the fiscal year ended April 30, 2007 which accounted for approximately 85% of annual revenue. In the fiscal year ended April 30, 2006, two customers accounted for approximately 56% and 40% of revenues.

F-54

CRYPTOMETRICS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2007

Note 1. Organization and Summary of Significant Accounting Policies (continued)

Fair Value

The Company has a number of financial instruments, none of which is held for trading purposes. The Company estimates that the fair value of all financial instruments at April 30, 2007 and 2006 does not differ materially from the aggregate carrying values of these financial instruments recorded in the accompanying consolidated balance sheets. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is necessarily required in interpreting market data to develop the estimates of fair value, and,
accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange

Cash and Cash Equivalents and Short-term Investments

Cash and cash equivalents include all cash balances on hand and short-term, highly liquid investments with original maturities of three months or less. Short-term investments are highly liquid marketable securities with maturities of greater then three months but less than one year. The market value of the short-term investments is essentially the same as cost, therefore the Company has not recorded any unrealized gains or losses on these investments.

Goodwill

The Company’s goodwill arose from its purchase of the common stock of Cryptometrics Canada, Inc. and totaled $10,500,000. During the fiscal year ended April 30, 2005, the Company incurred additional costs totaling $200,000 which have been added to the goodwill. Upon acquisition and at the years ended April 30, 2007 and 2006, the Company performed its required tests for impairment and has determined no impairment is required on each of those dates.

Foreign Currency Translation

The financial statements of the Company’s subsidiary are translated pursuant to Statement of Financial Accounting Standards (SFAS) No. 52 — “Foreign Currency Translation.” In accordance with the provisions of SFAS No. 52, the functional currency for the Company’s foreign operations is the local currency. Assets and liabilities are translated at the current rate of exchange and income and expenses are translated at the average exchange rate for the period. The resulting translation adjustments are recorded as a separate component of stockholders’ equity.

F-55

CRYPTOMETRICS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2007

Note 1. Organization and Summary of Significant Accounting Policies (continued)

Loss per share

Loss per share for the years ended April 30, 2007 and 2006 was computed by dividing net income by the weighted average number of common and common equivalent shares outstanding and also was adjusted for the assumed conversion of shares issuable upon the exercise of warrants and the assumed conversion of the convertible debt in accordance with SFAS No. 128, “Earnings Per Share”. The Company had a net loss for the years ended April 30, 2007 and 2006 and, accordingly, potential dilutive common shares are excluded from this computation for such year as the effect would be anti-dilutive. The total potential dilutive common shares excluded from this computation totaled 2,716,816 and 716,816 in the fiscal years ended April 30, 2007, and 2006, respectively.

Debt Issuance Costs

Debt issuance costs are the costs incurred relating to the convertible notes. The costs are amortized over the term of the related indebtedness.

Recently Issued Pronouncements

In February 2006, the FASB issued FASB Statement No. 155, “Accounting for Certain Hybrid Financial Instruments—an amendment of FASB Statements No. 133 and 140” (“FASB No. 155”). FASB No. 155 amends FASB Statements No. 133, Accounting for Derivative Instruments and Hedging Activities, and No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. FASB No. 155 resolves issues addressed in Statement 133 Implementation Issue No. D1, “Application of Statement 133 to Beneficial Interests in Securitized Financial Assets.”

FASB No. 155:

a.		Permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation

b.		Clarifies which interest-only strips and principal-only strips are not subject to the requirements of Statement 133

c.		Establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation

d.		Clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives

e.		Amends Statement 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument.

F-56

CRYPTOMETRICS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2007

Note 1. Organization and Summary of Significant Accounting Policies (continued)

Recently Issued Pronouncements (continued)

FASB No. 155 is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. The fair value election provided for in paragraph 4(c) of FASB No. 155 may also be applied upon adoption of FASB No. 155 for hybrid financial instruments that had been bifurcated under paragraph 12 of Statement 133 prior to the adoption of FASB No. 155. Earlier adoption is permitted as of the beginning of an entity’s fiscal year, provided the entity has not yet issued financial statements, including financial statements for any interim period for that fiscal year. Provisions of FASB No. 155 may be applied to instruments that an entity holds at the date of adoption on an instrument-by-instrument basis.

At adoption, any difference between the total carrying amount of the individual components of the existing bifurcated hybrid financial instrument and the fair value of the combined hybrid financial instrument should be recognized as a cumulative-effect adjustment to beginning retained earnings. The cumulative-effect adjustment should be disclosed gross (that is, aggregating gain positions separate from loss positions) determined on an instrument-by-instrument basis. Prior periods should not be restated. The Company does not believe there will be any effect on the financial statements upon adopting FASB No. 155.

In March 2006, the FASB issued FASB Statement No. 156, “Accounting for Servicing of Financial Assets—an amendment of FASB Statement No. 140” (FASB Statement No. 156”). FASB No. 156 amends FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, with respect to the accounting for separately recognized servicing assets and servicing liabilities. FASB No. 156 is effective for years beginning after September 15, 2006. The Company does not believe FASB No. 156 will have a material effect on the Company’s financial statements.

In September 2006, the FASB issued Statement No. 157, “Fair Value Measurements” (FASB No. 157”). FASB No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. FASB No. 157 applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. However, for some entities, the application of this Statement will change current practice.

FASB No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Earlier application is encouraged, provided that the reporting entity has not yet issued financial statements for that fiscal year, including financial statements for an interim period within that fiscal year. The Company is currently reviewing the potential effect of this statement on its financial statements.

F-57

CRYPTOMETRICS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2007

Note 1. Organization and Summary of Significant Accounting Policies (continued)

Recently Issued Pronouncements (continued)

In September 2006, the FASB issued Statement No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132R” (“FASB No. 158”). This Statement improves financial reporting by requiring an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This Statement also improves financial reporting by requiring an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions.

An employer with publicly traded equity securities is required to initially recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after December 15, 2006. The Company does not believe FASB No. 158 will have any material effect on its financial statements.

Note 2. Restatement and Reclassification of Previously Issued Financial Statements

The Company’s previously issued balance sheets, statements of operations, and cash flows for the fiscal year ended have been restated to correct for certain accounting errors in the following area:

Convertible debentures

The Company had previously recorded the debt as a conventional convertible debt. Subsequently the Company determined that the embedded derivatives within the convertible debenture agreement should be reported as embedded derivatives pursuant to FASB statement No. 133, “Accounting for Derivative Instruments and Hedging Activities”, and the Company also determined that these embedded derivatives do not meet the requirements for treatment of derivatives as equity instruments.

F-58

CRYPTOMETRICS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2007

Note 3. Acquisition

On March 9, 2004, the Company acquired BioDentity Systems, an Ottawa, Ontario Canada based company that specializes in facial recognition and image analysis hardware and software products. In September 2005, Biodentity Systems changed its name to Cryptometrics Canada, Inc. Pursuant to the Purchase Agreement the Company issued 1,382,957 shares of the Company’s common stock and options and warrants to purchase up to 117,043 shares of the Company’s common stock at an exercise price of $.06 Canadian per share ($.05 US at April 30, 2005). The Company valued these shares at $7 per share. The share price was based on other contemporaneous equity offerings. The Company valued the options and warrants at $7 also as the exercise price was less than one cent.

Note 4 — Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or market and consisted of the following at April 30:


	2007		2006
Purchased parts and materials	$	172,528	$	109,385
Finished goods, including spares		14,811		37,330


	$	187,339	$	146,715

Note 5 — Fixed Assets

Fixed assets are comprised of the following:


	Year ended April 30,
	2007		2006
Computer	$	1,348,827	$	1,074,352
Furniture and fixtures		200,749		203,224
Leasehold improvements		50,084		48,411


		1,599,660		1,325,987
Less: accumulated depreciation		812,796		540,629


	$	786,864	$	785,358

Depreciation expense totaled $305,054 and $244,516 for the years ended April 30, 2007 and 2006 respectively.

F-61

CRYPTOMETRICS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2007

Note 8 — Commitments

The Company leases several of its facilities through non-cancelable operating leases. The Company also leases several automobiles for various of its officers and employees. The summary of future minimum rental payments required under operating leases in excess of one year at April 30, 2007 is as follows:


Year ending
April 30,
2008	$	150,765
2009		154,629
2010		159,690
2011		13,342

Total	$	478,426

Note 9 — Contingencies

The Company’s Canadian subsidiary has been named in a formal complaint claiming restitution of lost wages by a former employee for improper termination. The Labour Ministry is currently reviewing the case and the ultimate outcome is indeterminable. Company management is of the opinion that the termination was in full compliance with Canada’s Employment Standards Act of 2000. Consequently no provision has been made in the Consolidated Financial Statements.

Note 10 — Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes using the enacted tax rates in effect in the years in which the differences are expected to reverse. The Company has net operating losses totaling approximately $26,300,000 (of which approximately $15,200,000 and $11,100,000 is attributable to the United States and Canada, respectively) on which may be used to offset income through 2026. Deferred income tax assets are comprised of the following:


	April 30,
	2007		2006
Deferred tax assets:
Net operating losses	$	10,501,134	$	6,721,132
Salaries		9,634		155,545


Total		10,501,768		6,876,677
Less: valuation allowance		10,501,768		6,876,677


	$	—	$	—

F-63

CRYPTOMETRICS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2007

Note 10 — Income Taxes (continued)

A reconciliation of the difference between the expected income tax rate using the statutory federal tax rate and the Company’s effective rate is as follows:


	Year ended		Year ended
	April 30,		April 30,
	2007		2006
U.S. Federal income tax statutory rate		(34%)		(34%)
State income tax, net of federal income tax benefit		(6%)		(6%)
Other- primarily net operating losses		40%		40%

		—%		—%

Note 11 — Common Stock Offerings

Through a series of offerings of the Company’s common stock, the Company has raised approximately $25,300,000. These offerings were exempt from securities registration pursuant to several different exemptions. Among other provisions, the underwriters were granted warrants to purchase up to 536,816 shares of the Company’s common stock at an exercise price of $7.35. The warrants are exercisable for a five-year period.

Note 12 — Convertible Debenture

On October 19, 2006 the Company closed a private placement through the issuance of a convertible debenture for $12,000,000. Among other provisions, the loan incurs interest at a rate of 8.25% per annum to be paid semi-annually and the term is the shorter of 18 months from the closing date or the date of the full conversion of the loan. The loan is convertible by the holder in totality or in part, into registered common shares of the Corporation or any future merged shares at a conversion price that ranges from 70% to 80% of the weighted average share price. If the Company does not close on the merger (as discussed in Note 14), or its shares are not listed on a public stock exchange, or no initial public offering has occurred within 12 months, the loan may be converted into shares of the Company’s common stock at $10 per share. The debenture agreement also provides the lender with certain piggy-back registration rights and anti-dilution provisions.

As part of the loan, upon closing, the Company has agreed to issue 2,000,000 warrants, for common shares upon the completion of the proposed merger with Jag Media Holdings, Inc. (Note 14). The exercise price for 400,000 of the warrants is $4.00 per share for a five year period from the closing date of the loan. The exercise price for the remaining warrants is between $3.00 and $6.00 per share and the exercise period is 18 months from the first day the Company is publicly traded. If the Company is not trading on any stock exchange within 12 months, the warrants shall be decreased to 876,000 warrants, which may be exercised for common shares of the Borrower at $7.25 per share.

F-64

CRYPTOMETRICS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2007

Note 12 — Convertible Debenture (continued)

In connection with the issuance of the warrants and beneficial conversion feature, the Company has reflected a value at April 30, 2007 for the warrants of $253,342 and a beneficial conversion feature value of $2,936,664. The fair value of the warrant grant was estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted average assumptions: expected volatility of 10%, risk free interest rate of between 4.59% and 4.93%; and expected lives of between 1.5 to 5 years. The warrants and beneficial conversion feature have been reported as an embedded derivative and has been reflected as a derivative liability as the warrants and beneficial conversion feature do not meet the requirements to be classified as equity. The embedded derivatives are revalued each reporting period and the gain or loss included in the statement of operations. For the period ended April 30, 2007, the Company reported a gain on these derivatives totaling $19,944.

Note 13 — Related Party Transaction

In April 2007 senior executives of CryptoMetrics, Inc., as owners of a majority of the outstanding shares of the Company, established BioDentity Systems, LLC (“BioDentity”), a limited liability company domiciled in Abu Dhabi and incorporated in accordance with the commercial laws of the United Arab Emirates (UAE).

The shareholders of record of the Company as of May 1, 2007 beneficially own 49% of the outstanding shares of BioDentity. The remaining 51% is held by a locally domiciled nominee entity, as required by the commercial laws of the UAE.

BioDentity Systems was established with the objective and intention of providing the UAE with technology for protecting critical infrastructure and key asset comprehensive security solutions.

Through an Exclusive Provider Agreement (“EPA”) BioDentity agreed, among other provisions, to grant CryptoMetrics the exclusive right, in perpetuity, to provide all the technology and operational support for the implementation and deployment of such technology and support toward the above stated objective. CryptoMetrics is to provide a license to BioDentity to utilize its technology in the UAE and has agreed to assist BioDentity with all of the requirements for the development, contractual arrangements, implementations and deployments of a National Infrastructure Security (“NISEC”) System within the UAE.

In consideration of and an integral part of the EPA, CryptoMetrics agreed to make interest free advances to BioDentity up to $1,000,000 to fund start-up costs and initial working capital requirements, as needed. BioDentity is to repay, within the first full year of operations, any such advances, as well as any and all amounts expended and/or advanced by CryptoMetrics on behalf of BioDentity in furtherance of the final implementation and deployment of a NISEC System, including all necessary contractual agreements and arrangements.

F-65

CRYPTOMETRICS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2007

Note 13 — Related Party Transaction (continued)

BioDentity has entered into a Letter Of Intent (“LOI”) with third parties in the UAE, whereby, among other provisions, BioDentity would potentially act as the prime contractor, technical solutions integrator of a NISEC System in the UAE and exclusively use CryptoMetrics’ products, solutions and services. The LOI sets forth a series of payments up to $2,300,000, to be made by BioDentity linked to a number of successive milestones toward accomplishing the final objective.

As of April 30, 2007, CryptoMetrics advanced $50,000 for the establishment of BioDentity pursuant to the EPA. Additionally, the Company advanced $525,000 on behalf of BioDentity based on the completion of certain of the milestones as set forth in the LOI.

Subsequent to April 30, 2007 and through August 17, 2007, CryptoMetrics advanced to and on behalf of BioDentity pursuant to the EPA and LOI a total of $1,145,000.

Note 14 — Proposed Acquisition

On December 27, 2005, the Company entered into an agreement and plan of merger (the “Merger Agreement”) with Jag Media Holdings Inc. (“Jag Media”), pursuant to which Cryptometrics would merge with a newly created subsidiary of Jag Media. In consideration of the merger, the stockholders of Cryptometrics would acquire shares of common stock of Jag Media, which shares would, upon issuance, represent approximately 88% of the outstanding Company common stock, in exchange for all of the issued and outstanding capital stock of Cryptometrics. The shares of common stock to be received by the stockholders of Cryptometrics are to be registered under the U.S. Securities Act of 1933, as amended. If consummated, the proposed transaction would be accounted for as a reverse acquisition in which Cryptometrics would be the acquirer for accounting purposes. The Merger Agreement, among other provisions, provides that either party can terminate the agreement at any time, without penalty.

At the closing of the proposed transaction, Jag Media’s current directors would resign as directors and would also resign as officers and executives of the new Company. Jag Media’s board of directors would be replaced with designees of Cryptometrics.

F-66

Cryptometrics, Inc. and Subsidiary
Consolidated Statements of Cash Flows
Six Months ended October 31, 2007
(unaudited)


	Six Months Ended
	31-Oct
	2007			2006
Cash flows from operating activities

Net loss		(5,250,396	)		(4,149,677	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		185,858			165,169
Gain on derivative liability		(26,815	)
Amortization of deferred finance fees		310,310
Changes in assests and liabilities:
Accounts receivable		(42,272	)		(868,666	)
Inventories		(14,665	)		(134,492	)
Prepaid expenses and other assets		12,104			42,990
Income tax recoverable		(145,115	)		(76,770	)
Accounts payable and accrued expenses		254,722			1,041,761


Net cash used in operating activities		(4,716,269	)		(3,979,685	)


Cash flows from investing activities:
Acquisition of fixed assets		(226,124	)		(181,091	)
Loans to related party		(3,055,184	)
Short term investments					616,548
Patent application costs		(100,529	)		(166,248	)


Net cash flows from investing activites		(3,381,837	)		269,209


Cash flows from financing activites:
Net borrowings from note payable		1,443,883
Issuance of Convertible Debt					12,000,000
Issuance costs					(930,931	)


Net cash provided by financing activities		1,443,883			11,069,069


Net effect of currency translation		241,476			243,899


Net increase (decrease) in cash and cash equivalents		(6,412,747	)		7,602,492

Cash and cash equivalents at period beginning		8,953,949			7,520,056


Cash and cash equivalents at period end	$	2,541,202		$	15,122,548


Supplemental cash flow information:
Cash paid during the period for:
Interest paid

Income taxes paid

F-69

CRYPTOMETRICS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2007

Note 1. Organization and Business

Cryptometrics, Inc., is a provider of biometric solutions for critical infrastructure and key asset protection. Cryptometrics provides both hardware and software solutions focusing on biometric identification and verification both domestically and internationally. The FingerSURE product line provides encryption software, allowing users of both trusted and non-trusted authentication devices the ability to, in a secure manner to verify identity via a finger print. The SecurIDent product line contains proprietary software products/solutions that possess image quality analysis, eye finding logic, image normalization and matching. From a hardware prospective Cryptometrics provides its various biometric smart cameras utilizing off the shelf casings, sensors and lens; configured utilizing intellectual property and providing live capture images that are suitable for facial recognition. This technology is applied and utilized by Border Patrols, Immigration Authorities, and various governmental and non-governmental agencies.

Cryptometrics was incorporated in the State of Delaware in May 2000 under the name Postal Hut, Inc. In November 2001, its name was changed to Cryptometrics, Inc.

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of Cryptometrics and its wholly-owned subsidiary, Cryptometrics Canada, Inc. All material intercompany transactions have been eliminated in consolidation.

The accompanying interim condensed consolidated financial statements have been prepared, without audit, in accordance with the instructions to Form 10-QSB for interim financial reporting pursuant to the rules and regulations of the Securities and Exchange Commission. While these statements reflect all normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the results of the interim period, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. Therefore, the interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the filings on Form S-4 for the fiscal year ended April 30, 2007, made in conjunction with the proposed merger with JAG Media Holdings, Inc.

The results and trends on these interim consolidated financial statements for the three and six months ended October 31, 2007 and 2006 may not be representative of those for the full fiscal years, or any future periods.

Note 2. Summary of Significant Accounting Policies

Estimates

F-70

CRYPTOMETRICS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2007

Note 2. Summary of Significant Accounting Policies (continued)

allowances,warranty costs, revenue recognition as well as loss contingencies and restructurings. Actual results could differ from these estimates.

Accounts Receivable

Based on Cryptometric’s customer base and experience, Cryptometrics has not had material bad debts and therefore does not provide for an allowance for doubtful accounts, but expenses bad debts in the period of determination as to collectibility.

Revenue Recognition Policy

Certain of Cryptometric’s equipment sales such as its’ SecurIDent Systems generally require installation subsequent to shipment and transfer of title. Cryptometrics recognizes revenue on such sales in accordance with Staff Accounting Bulletin (“SAB”) 104, “Revenue Recognition”. Revenue related to equipment sales that are contingent on installation is deferred until installation is complete, title has transferred and customer acceptance has been obtained. Cryptometrics considers acceptance of the SecurIDent Systems contingent upon successful installation of the product. Revenues from sales of products via authorized representatives, dealers, distributors or other third party sales channels are recognized at the time of title transfer, generally upon shipment.

Cryptometrics also sells several stand-alone software products including Face Recognition Server, Face Processor and software developer kits. Revenue is recognized on software products in accordance with Statement of Position (“SOP”) 97-2, “Software Revenue Recognition,” as amended. Cryptometrics recognizes revenue on software products when persuasive evidence of an arrangement exists, delivery has occurred, the vendor’s fee is fixed or determinable and vendor-specific objective evidence (“VSOE”) of fair value exists to allocate the total fee to all undelivered elements of the arrangement and collection is deemed reasonably assured. VSOE of fair value is established based upon either sales of the element (e.g., maintenance, training or consulting) in individual transactions, or, in certain cases for maintenance, based upon substantive renewal rates. In cases where Cryptometrics does not have VSOE of fair value for all delivered elements in the transaction (e.g., for licenses), the fees from these multiple-element agreements are allocated using the residual value method. In circumstances when the software and services being sold include services to provide significant production, modification or customization of the software and the services cannot be segregated into separate units of accounting, Cryptometrics accounts for the software sales under SOP 97-2 and SOP 81-1 “Accounting for performance of construction-type and certain production-type contracts”. In the cases where SOP 81-1 is applied, Cryptometrics uses the cost-to-cost percentage of

F-71

CRYPTOMETRICS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2007

Note 2. Summary of Significant Accounting Policies (continued)

completion method. Under this method, sales, including estimated earned fees or profits, are recorded based on the percentage that total costs incurred bear to total estimated costs. Maintenance revenue is deferred and recognized ratably over the life of the service period of the related agreement.

Fixed Assets

Fixed assets are stated at cost. Cryptometrics provides for depreciation generally on a straight-line method by charges to income at rates based upon estimated recovery periods below. Cryptometrics Canada, Inc. provides for depreciation generally on the declining balance method by charges to income at rates based upon estimated recovery periods below.


Furniture		5 to 7 years
Computer equipment		3 to 5 years
Leasehold improvements		Remaining lease term or useful life

Income Taxes

Cryptometrics deferred income taxes are principally from the net operating losses and other timing differences. Income taxes are reported based upon Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes”.

Research and Development Costs

Cryptometrics expenses research and development costs as incurred. For research and development costs incurred in Canada, Cryptometrics claims research and development deductions and the related investment tax credits. These claims are subject to audit by the applicable tax authorities in Canada.

Patents and Trademarks

F-72

CRYPTOMETRICS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2007

Note 2. Summary of Significant Accounting Policies (continued)

Indemnification Arrangements and Product Warranties

From time to time, Cryptometrics agrees to indemnify its customers against liability if Cryptometrics products infringe a third party’s intellectual property rights. As of October 31, 2007, Cryptometrics was not subject to any pending litigation alleging that Cryptometrics products infringe the intellectual property rights of any third parties.

Cryptometrics offers a 90-day and one year warranty on various products and services. The majority of the warranty liability that Cryptometrics has recorded is due to one-year warranties. Cryptometrics estimates the costs that may be incurred under its warranties and records a liability in the amount of such costs at the time the product is sold. Factors that affect Cryptometrics warranty liability include the number of units sold, historical and anticipated rates of warranty claims and cost per claim.

Concentration of Credit Risk

Financial instruments that potentially subject Cryptometrics to concentrations of credit risk consist principally of cash and accounts receivable. Cryptometrics maintains substantially all its cash balances in a limited number of financial institutions. The balances in the United States are insured by the Federal Deposit Insurance Corporation up to $100,000.

Fair Value

Cryptometrics has a number of financial instruments, none of which is held for trading purposes. Cryptometrics estimates that the fair value of all financial instruments at October 31, 2007 and April 30, 2007 does not differ materially from the aggregate carrying values of these financial instruments recorded in the accompanying consolidated balance sheets. The estimated fair value amounts have been determined by Cryptometrics using available market information and appropriate valuation methodologies. Considerable judgment is necessarily required in interpreting market data to develop the estimates of fair value, and, accordingly, the estimates are not necessarily indicative of the amounts that Cryptometrics could realize in a current market exchange

Cash and Cash Equivalents and Short-term Investments

Cash and cash equivalents include all cash balances on hand and short-term, highly liquid investments with original maturities of three months or less. Short-term investments are highly liquid marketable securities with maturities of greater then three months but less than one year. The market value of the short-term investments is essentially the same as cost; therefore Cryptometrics has not recorded any unrealized gains or losses on these investments.

Goodwill

F-73

CRYPTOMETRICS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2007

Note 2. Summary of Significant Accounting Policies (continued)

effective for fiscal years beginning after December 15, 2001. Under the rules, the pooling of interests method of accounting for acquisitions is no longer allowed and goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with the Statements.

Cryptometrics goodwill arose from its purchase of the common stock of Cryptometrics Canada, Inc. and totaled $10,500,000. During the fiscal year ended April 30, 2005, Cryptometrics incurred additional costs totaling $200,000 which have been added to the goodwill. Upon acquisition and at the year ended April 30, 2007, Cryptometrics performed its required tests for impairment and has determined no impairment is required on each of those dates.

Foreign Currency Translation

The financial statements of Cryptometrics’ subsidiary are translated pursuant to Statement of Financial Accounting Standards (SFAS) No. 52 — “Foreign Currency Translation.” In accordance with the provisions of SFAS No. 52, the functional currency for Cryptometrics foreign operations is the local currency. Assets and liabilities are translated at the current rate of exchange and income and expenses are translated at the average exchange rate for the period. The resulting translation adjustments are recorded as a separate component of stockholders’ equity.

Loss per share

Loss per share for the fiscal second quarter and six months ended October 31, 2007 and 2006 was computed by dividing net income by the weighted average number of common and common equivalent shares outstanding and also was adjusted for the assumed conversion of shares issuable upon the exercise of warrants and the assumed conversion of the convertible debt in accordance with SFAS No. 128, “Earnings Per Share”. Cryptometrics had a net loss for the fiscal second quarter and six months ended October 31, 2007 and 2006 and, accordingly, potential dilutive common shares are excluded from this computation for such year as the effect would be anti-dilutive. The total potential dilutive common shares excluded from this computation totaled 2,716,816 and 716,816 in the second quarter and six months ended October 31, 2007, and 2006, respectively.

Debt Issuance Costs

Debt issuance costs are the costs incurred relating to the convertible notes. The costs are amortized over the term of the related indebtedness.

F-74

CRYPTOMETRICS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2007

Note 3 — Comprehensive Loss

Comprehensive loss consists of the following for the fiscal second quarter and six months ended October 31, 2007 and 2006.

QUARTER ENDED

SIX MONTHS ENDED

OCT 31, 2007

OCT 31, 2006

OCT 31, 2007

OCT 31, 2006

Net loss

<2,596,084>

<2,230,921>

<5,250,396>

<4,149,677>

Gain on foreign currency exchange

173,692

178,197

241,476

243,899

Net comprehensive loss

<2,422,392>

<2,052,724>

<5,008,920>

<3,905,778>

Note 4 — Related Party Transaction

In April 2007 senior executives of Cryptometrics, Inc., as owners of a majority of the outstanding shares of Cryptometrics, established Biodentity Systems, LLC (“Biodentity”), a limited liability company domiciled in Abu Dhabi and incorporated in accordance with the commercial laws of the United Arab Emirates (UAE).

The shareholders of record of Cryptometrics as of May 1, 2007 beneficially own 49% of the outstanding shares of Biodentity. The remaining 51% is held by a locally domiciled nominee entity, as required by the commercial laws of the UAE.

Biodentity Systems was established with the objective and intention of providing the UAE with technology for protecting critical infrastructure and key asset comprehensive security solutions.

Through an Exclusive Provider Agreement (“EPA”) Biodentity agreed, among other provisions, to grant Cryptometrics the exclusive right, in perpetuity, to provide all the technology and operational support for the implementation and deployment of such technology and support toward the above stated objective. Cryptometrics is to provide a license to Biodentity to utilize its technology in the UAE and has agreed to assist Biodentity with all of the requirements for the development, contractual arrangements, implementations and deployments of a National Infrastructure Security (“NISEC”) System within the UAE.

In consideration of and an integral part of the EPA, Cryptometrics agreed to make interest free advances to Biodentity up to $1,000,000 to fund start-up costs and initial working capital requirements, as needed. Biodentity is to repay, within the first full year of operations, any such advances, as well as any and all amounts expended and/or advanced by Cryptometrics on behalf of Biodentity in furtherance of the final implementation and deployment of a NISEC System, including all necessary contractual agreements and arrangements.

Biodentity has entered into a Letter Of Intent (“LOI”) with third parties in the UAE, whereby, among other provisions, Biodentity would potentially act as the prime contractor, technical solutions integrator of a NISEC System in the UAE and exclusively use Cryptometrics’ products, solutions and

F-75

CRYPTOMETRICS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2007

services. The LOI sets forth a series of payments up to $2,300,000, to be made by Biodentity linked to a number of successive milestones toward accomplishing the final objective.

As of October 31, 2007 Cryptometrics advanced to and on behalf of Biodentity pursuant to the EPA and LOI a total of $2,120,000.

In addition, on September 21, 2007 Cryptometrics deposited $1,510,184 with Biodentity’s bank in the UAE in order to secure a Bid Bond posted by the bank for Biodentity’s eligibility to bid on a UAE project. The deposit was funded by a one-time borrowing from Cryptometrics’ bank in the United States. It is anticipated that the deposit will be released by Biodentity’s bank and returned to Cryptometrics no later than January 31, 2008 at which time Cryptometrics’ borrowing will be fully extinguished. As of October 31, 2007, Cryptometrics accrued interest associated with this borrowing was $5,840.

Note 5 — Proposed Acquisition

On December 27, 2005, Cryptometrics entered into an agreement and plan of merger (the “Merger Agreement”) with Jag Media Holdings Inc. (“Jag Media”), pursuant to which Cryptometrics would merge with a newly created subsidiary of Jag Media. In consideration of the merger, the stockholders of Cryptometrics would acquire shares of common stock of Jag Media, which shares would, upon issuance, represent approximately 87% of the outstanding company common stock, in exchange for all of the issued and outstanding capital stock of Cryptometrics. The shares of common stock to be received by the stockholders of Cryptometrics are to be registered under the U.S. Securities Act of 1933, as amended. If consummated, the proposed transaction would be accounted for as a reverse acquisition in which Cryptometrics would be the acquirer for accounting purposes. The Merger Agreement, among other provisions, provides that either party can terminate the agreement at any time, without penalty.

At the closing of the proposed transaction, Jag Media’s current directors would resign as directors and would also resign as officers and executives of the new company. Jag Media’s board of directors would be replaced with designees of Cryptometrics.

F-76

APPENDICES


	Appendix A			Form of Written Consent of Stockholder(s) of Cryptometrics, Inc. in Lieu of Meeting
	Appendix B			Amendments to Article First and Article Fourth of the Articles of Incorporation of JAG Media Holdings, Inc.
	Appendix C-1			Merger Agreement dated as of December 27, 2005 by and among JAG Media Holdings, Inc., Cryptometrics Acquisition, Inc. and Cryptometrics, Inc.
				Exhibit A — Company Voting and Lock-Up Agreement
				Exhibit B — Certificate of Merger
				Exhibit C — Affiliate Agreement
	Appendix C-2			Amendment to Merger Agreement, dated January 24, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Robert Barra, Michael Vitale, Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Thomas J. Mazzarisi and Stephen J. Schoepfer
	Appendix C-3			Amendment to Merger Agreement, dated February 26, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Robert Barra, Michael Vitale, Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Thomas J. Mazzarisi and Stephen J. Schoepfer
	Appendix C-4			Amendment to Merger Agreement, dated April 2, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Robert Barra, Michael Vitale, Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Thomas J. Mazzarisi, and Stephen J. Schoepfer
	Appendix C-5			Amendment to Merger Agreement, dated April 20, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Robert Barra, Michael Vitale, Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Thomas J. Mazzarisi, and Stephen J. Schoepfer
	Appendix C-6			Amendment to Merger Agreement, dated May 11, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Robert Barra, Michael Vitale, Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Thomas J. Mazzarisi, and Stephen J. Schoepfer
	Appendix C-7			Amendment to Merger Agreement, dated May 18, 2007, by and among JAG Media Holdings, Inc. Cryptometrics, Inc., Robert Barra, Michael Vitale, Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Thomas J. Mazzarisi and Stephen J. Schoepfer
	Appendix C-8			Amendment to Merger Agreement, dated June 15, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Robert Barra, Michael Vitale, Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Thomas J. Mazzarisi and Stephen J. Schoepfer
	Appendix C-9			Amendment to Merger Agreement, dated July 16, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Robert Barra, Michael Vitale, Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Thomas J. Mazzarisi and Stephen J. Schoepfer
	Appendix C-10			Amendment to Merger Agreement, dated August 16, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Robert Barra, Michael Vitale, Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Thomas J. Mazzarisi and Stephen J. Schoepfer
	Appendix C-11			Amendment to Merger Agreement, dated November 7, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Robert Barra, Michael Vitale, Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Thomas J. Mazzarisi and Stephen J. Schoepfer
	Appendix C-12			Amendment to Merger Agreement, dated February 6, 2008, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Robert Barra, Michael Vitale, Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Thomas J. Mazzarisi and Stephen J. Schoepfer
	Appendix D			Section 262 of the Delaware General Corporation Law (Appraisal Rights)
	Appendix E			Form of Employment Agreement
				Exhibit A — Option Agreement
				Exhibit B — Release of Claims Agreement

APPENDIX A

WRITTEN CONSENT
OF
STOCKHOLDER(S)
OF
CRYPTOMETRICS, INC.
IN LIEU OF MEETING

The undersigned holder(s) of outstanding capital stock entitled to vote of Cryptometrics, Inc., a Delaware corporation (the “Corporation”), do(es) hereby consent, pursuant to Section 228(a) of the General Corporation Law of the State of Delaware, to the adoption of the following resolution:

WHEREAS, the Board of Directors of the Corporation, after due and careful consideration, has approved the agreement and plan of merger dated December 27, 2005 by and among the Corporation, JAG Media Holdings, Inc., Cryptometrics Acquisition, Inc., a Delaware corporation and wholly-owned subsidiary of JAG Media Holdings, Inc., Robert Barra and Michael A. Vitale, and eleven subsequent amendments thereto through and including an amendment dated February 6, 2008 (as so amended, the “Agreement and Plan of Merger”) and declared its advisability;

NOW THEREFORE, BE IT RESOLVED, that the Agreement and Plan of Merger be, and the same hereby is, adopted, together with, to the fullest extent permitted by law, all such amendments thereto as may be approved by the Board of Directors of the Corporation, including, without limitation, amendments to the termination date of the Agreement and Plan of Merger and amendments related to the Corporation’s payment of costs and expenses of JAG Media Holdings, Inc.

IN WITNESS WHEREOF, the undersigned has/have executed this Written Consent on the date stated below.

Date:

This consent must be dated to be effective.

Number of Shares:

Signature of stockholder

Print name of stockholder

Signature of stockholder

Print name of stockholder

Note that both stockholders should sign for shares held jointly

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER, dated as of December 27, 2005 (the “Agreement”), by and among JAG Media Holdings, Inc., a Nevada corporation (“Parent”), Cryptometrics Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), Cryptometrics, Inc., a Delaware corporation (the “Company”) and the Principal Stockholders named herein. Capitalized terms used in this Agreement shall have the meanings assigned to them in Article XI or in the applicable Section of this Agreement to which reference is made in Article XI.

WHEREAS, the respective Boards of Directors of Parent, Merger Sub and Company deem it advisable and in the best interests of their respective stockholders to consummate the business combination provided for herein;

WHEREAS, in furtherance thereof, the respective Boards of Directors of Parent, Merger Sub and Company have approved this Agreement and the Merger, upon the terms and subject to the conditions set forth in this Agreement;

WHEREAS, the Board of Directors of Parent has authorized the issuance of shares of Parent Common Stock pursuant to the Merger;

WHEREAS, the Board of Directors of Company has adopted a resolution approving the Merger, declaring its advisability and determined to recommend to the stockholders of Company the adoption of this Agreement;

WHEREAS, Parent, as the sole stockholder of Merger Sub, has adopted this Agreement;

WHEREAS, for federal income tax purposes, it is intended that the acquisition of Company by Parent pursuant to this Agreement shall qualify as a reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986 (the “Code”); and

WHEREAS, Robert Barra and Michael A. Vitale (together, the “Principal Stockholders”, and each, a “Principal Stockholder”) collectively own beneficially and of record in excess of 50% of the outstanding capital stock of Company; and

WHEREAS, concurrently with the execution of this Agreement, and as a condition and inducement to Parent’s willingness to enter into this Agreement, each of the Principal Stockholders of Company are entering into lock-up and voting agreements with Parent in substantially the form attached as Exhibit A (collectively, the “Company Lock-Up and Voting Agreements”).

NOW, THEREFORE, in consideration of the foregoing premises and the respective representations and warranties, covenants and agreements contained herein, the parties hereto agree as follows:

ARTICLE I

THE MERGER

1.1 The Merger. Subject to the terms and conditions of this Agreement and the Certificate of Merger in such form as is required by the relevant provisions of the Delaware General Corporation Law (the “DGCL”) as attached hereto as Exhibit B, at the Effective Time, Merger Sub shall be merged with and into Company and the separate corporate existence of Merger Sub shall thereupon cease (the “Merger”). As a result of the Merger, the outstanding shares of capital stock of Company and Merger Sub shall be converted or canceled in the manner provided in Article II of this Agreement, the separate corporate existence of Merger Sub shall cease and Company shall be the surviving corporation following the Merger. Merger Sub and Company are sometimes referred to herein as the “Constituent Corporations” and Company as the surviving corporation following the Merger is sometimes referred to herein as the “Surviving Corporation.”

1.2 Closing; Effective Time. The closing of the Merger (the “Closing”) shall take place at the offices of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, New York 10178, at 10:00 a.m. on a date to be specified by the parties which shall be no later than two (2) Business Days after satisfaction (or waiver as provided herein) of the conditions set forth in Article VIII (other than those conditions that by their nature will be satisfied at the Closing), unless another time, date and/or place is agreed to in writing by the parties. The date upon which the Closing occurs is herein referred to as the “Closing Date.” Simultaneously with, or as soon as practicable following the Closing, Company, as the surviving corporation, shall file the Certificate of Merger with the Secretary of State of the State of Delaware as provided in Section 252(c) of the DGCL. The Merger shall become effective at such time as the Certificate of Merger is so filed or at such later time as is set forth in the Certificate of Merger, if different, which time is hereinafter referred to as the “Effective Time.”

1.3 Effects of the Merger.

(a) At and after the Effective Time, the Merger shall have the effects specified in the DGCL.

(b) At the Effective Time, the Certificate of Incorporation of Company shall be the Certificate of Incorporation of the Surviving Corporation until amended thereafter in accordance with applicable Delaware law.

(c) At the Effective Time, the Bylaws of Company shall be the Bylaws of the Surviving Corporation until amended thereafter in accordance with applicable Delaware law.

(d) At the Effective Time, the directors and officers of Company immediately prior to the Effective Time shall remain the directors and officers of the Surviving Corporation, each to hold office until their respective death, permanent disability, resignation or removal or until their respective successors are duly elected and qualified, all in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation and applicable Law.

1.4 Post-Merger Actions. Promptly after the Effective Time:

(a) the Board of Directors of Parent will amend the Bylaws of Parent to permit a Board of Directors of not less than one (1) nor more than twelve (12) directors;

(b) the Board of Directors of Parent shall appoint as directors to fill some or all of such vacancies such persons as the management of the Company shall designate, which designees shall include a sufficient number of independent directors to comply with the requirements of The Sarbanes-Oxley Act of 2002 and the rules and requirements of the NASDAQ Capital Market;

(c) the officers of Parent and the directors of Parent prior to the Effective Time shall resign as officers and directors of Parent, but not as managers and officers of Parent’s wholly-owned subsidiary, JAG Media LLC;

(d) Parent shall (i) amend Section 11 of the existing employment agreements of such officers (the “Employment Agreements”) to fix the payout period on termination without cause at 12 months, (ii) amend Section 4 of the Employment Agreement to cancel all options granted to the officers pursuant to such section and (iii) amend Section 6 of the Employment Agreements to reduce the number of options granted to each of the officers upon a change in control from 1,000,000 to 750,000, which shall be exercisable immediately on a cashless basis, with one half of such shares being subject to a lock up period of one year from the date of the Closing;

(e) Parent shall assign the Employment Agreements to JAG Media LLC and cause it to accept same, and such officers shall release Parent from all liability thereunder (including salary payments) except that Parent shall remain contractually obligated to carry out its obligations to fulfill any exercise of options remaining under such Employment Agreements;

(f) JAG Media LLC shall terminate the employment of such officers under the Employment Agreements without cause;

(g) the Board of Directors shall elect new officers of Parent.

1.5 Further Assurances. If, at any time after the Effective Time, the Surviving Corporation shall consider or be advised that any deeds, bills of sale, assignments or assurances or any other acts or things are necessary, desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in the Surviving Corporation its right, title and interest in, to or under any of the rights, privileges, powers, franchises, properties or assets of either of the Constituent Corporations, or (b) otherwise to carry out the purposes of this Agreement, the Surviving Corporation and its proper officers and directors or their designees shall be authorized to execute and deliver, in the name and on behalf of either Constituent Corporation, all such deeds, bills of sale, assignments and assurances and to do, in the name and on behalf of either Constituent Corporation, all such other acts and things as may be necessary, desirable or proper to vest, perfect or confirm the Surviving Corporation’s right, title and interest in, to and under any of the rights, privileges, powers, franchises, properties or assets of such Constituent Corporation and otherwise to carry out the purposes of this Agreement.

ARTICLE II

EFFECT ON CAPITAL STOCK; SURRENDER OF CERTIFICATES AND PAYMENT

2.1 Effect on Capital Stock. At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, Company or any stockholder of Company (each such stockholder, a “Company Stockholder”):

The holders of all shares of common stock of Company, par value $0.001 per share (the “Company Common Stock”) (each such share of Company Common Stock, a “Company Share”), issued and outstanding immediately prior to the Effective Time, including as outstanding for this purpose the total number of shares of Company Common Stock for which outstanding exchangeable shares of the Company’s Canadian subsidiary can be exchanged (“Outstanding Company Common Stock” and each an “Outstanding Company Share”) shall be entitled to receive shares of fully paid and nonassessable common stock of Parent, par value $0.00001 per share (“Parent Common Stock”) equal to 7.4656 times the number of shares of Parent Common Stock issued and outstanding at the Effective Time of the Merger, (i) excluding all shares of Parent Common Stock held in the treasury of Parent, and (ii) excluding all shares of Series 2 and Series 3 Class B common stock outstanding, but (iii) including as outstanding the relevant number of shares of Parent Company stock into which shares of Parent which are still outstanding and can be converted (but have not yet been converted) by virtue of recapitalizations carried out by Parent (the “Merger Consideration”).

(a) Each Outstanding Company Share shall be converted into the right to receive and become exchangeable, as provided in Section 2.2 hereof, for the number of shares of Parent Common Stock represented by the quotient obtained by dividing the Merger Consideration by the total number of shares of Outstanding Company Common Stock (the “Exchange Multiple”), subject to adjustment as provided in Section 2.2(f).

(b) Each share of Company Common Stock held in Company’s treasury shares immediately prior to the Effective Time and each share owned by any subsidiary of Company shall not represent the right to receive any Merger Consideration, and each such share shall be canceled and retired and shall cease to exist, and no cash, securities or other property shall be payable in respect thereof;

(c) Each share of common stock of Merger Sub, par value $0.001 per share, issued and outstanding immediately prior to the Effective Time shall be converted into and become one fully paid and nonassessable share of common stock, par value $0.001 per share, of the Surviving Corporation.

(d) Each Company Stockholder (after aggregating the fractional shares of Parent Common Stock that would otherwise be received by such holder) shall be entitled only to the number of shares of Parent Common Stock to which such Company Stockholder is entitled by virtue of Sections 2.1(a) and (b) or 2.2(f) rounded down to the nearest whole number. No fractional shares of Parent Common Stock shall be issued in connection with the Merger.

(e) Unless the value of the fractional share of Parent Common Stock which otherwise would have been issued by virtue of the Merger to a Company Stockholder exceeds an aggregate cash amount of One Dollar ($1.00), determined as provided below, such Company Stockholder shall not be entitled to receive a cash payment in lieu of a fractional share of Parent Common Stock. In the event that the value of the fractional share of Parent Common Stock to be issued by virtue of the Merger to a Company Stockholder exceeds One Dollar ($1.00), any such Company Stockholder entitled to receive a fractional share of Parent Common Stock will be entitled to receive a cash payment in lieu of such fractional share in an amount determined by Parent to be equal to such fraction multiplied by the arithmetic mean of the closing prices of Parent Common Stock on the Pink Sheets LLC over the twenty (20) trading days ending three (3) trading days prior to the Closing.

(f) If between the date of this Agreement and the Effective Time, there shall be any stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares or any similar event with respect to Company Common Stock or Parent Common Stock, the Exchange Multiple and the Merger Consideration and any other amounts payable pursuant to this Agreement shall be correspondingly adjusted to the extent appropriate to reflect such stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares or similar event.

2.2 Exchange of Company Shares and Surrender of Stock Certificates.

(a) Following the execution hereof, Parent shall enter into an agreement with Transfer Online, Inc., or such other transfer agent, bank or trust company of recognized standing that may be designated by Parent and is reasonably satisfactory to Company (the “Exchange Agent”). Upon Company’s receipt of Company Stockholder Approval, Parent shall deposit, or shall cause to be deposited, with the Exchange Agent, for the benefit of Company Stockholders, certificates representing the shares of Parent Common Stock issuable pursuant to Section 2.1 in respect of Company Shares. In the event that any amount is payable to any Company Stockholders pursuant to Section 2.1(e), Parent shall also deposit with the Exchange Agent cash in an amount sufficient to make the payments in lieu of fractional shares pursuant to Section 2.1(e). The certificates, together with any cash in dividends or distributions with respect thereto and any cash made available in lieu of fractional shares, are hereinafter referred to as the “Exchange Fund”.

(b) As promptly as reasonably practicable after the Effective Time, Parent shall cause the Exchange Agent to mail to each holder of record of Company Shares a letter of transmittal and instructions (which shall be in customary form and shall specify that delivery shall be effected, and risk of loss and title to Company Shares shall pass, only upon proper delivery of the certificates representing Company Shares (“Certificates”) to the Exchange Agent) for use in exchanging Company Shares for the Merger Consideration payable in respect of such Company Shares. Upon surrender to the Exchange Agent of a Certificate for cancellation, together with such letter of transmittal, duly executed and completed in accordance with the instructions thereto, and such other documents as may be reasonably required pursuant to such instructions, the holder of such Company Shares shall be entitled to receive in exchange therefor that number of whole shares of Parent Common Stock to which the holder thereof is entitled pursuant to Section 2.1(a) and payment in lieu of fractional shares which such holder is

entitled to receive pursuant to Section 2.1(e) in the event that the fractional shares of Parent Common Stock to be issued by virtue of the Merger to Company Stockholders exceeds an aggregate cash amount of One Dollar ($1.00) and any dividends or distributions payable pursuant to Section 2.3 and the Certificate so surrendered forthwith shall be canceled.

(c) In the event of a transfer of Company Shares that is not registered in the transfer records of Company, shares of Parent Common Stock issued in exchange for Company Shares pursuant to Section 2.1 may be issued to a Person other than the Person in whose name the surrendered Certificate is surrendered, if (i) such Certificate is properly endorsed or is otherwise in proper form for transfer and (ii) the Person requesting such issuance pays to the Exchange Agent any and all Taxes required as a result of the issuance to a Person other than the registered holder of the Certificate or establishes by evidence satisfactory to the Exchange Agent that any such Taxes have been paid or are not payable. Until surrendered or transferred as contemplated by this Section 2.2, each Certificate (other than Certificates representing Dissenting Shares) shall represent at all times after the Effective Time solely the right to receive, upon such surrender or transfer, in accordance with the terms hereof, the Merger Consideration (together with any amounts payable pursuant to Section 2.1(f) and/or Section 2.3) in respect of Company Common Stock represented thereby.

(d) All shares of Parent Common Stock issued in accordance with the terms hereof (including any cash paid in respect thereof pursuant to Section 2.1(e) and/or Section 2.3) upon surrender of the Certificates in accordance with the terms of this Article II shall be deemed to have been paid in full satisfaction of all rights pertaining to Company Shares theretofore represented by Certificates. At the close of business at 5:00 pm on the day immediately preceding the Effective Time, the stock transfer books of Company shall be closed and there shall be no further registration of transfers of Company Shares thereafter on the records of Company. From and after the Effective Time, Company Stockholders shall cease to have any rights with respect to Company Shares outstanding immediately prior to the Effective Time, except as otherwise provided in this Agreement or by Law. On or after the Effective Time, any Certificates presented to the Exchange Agent or Parent for any reason shall be canceled and exchanged for the Merger Consideration provided for in Section 2.1 (and any amounts payable pursuant to Sections 2.1(f) and/or Section 2.3).

(e) Any portion of the Exchange Fund that remains undistributed to Company Stockholders for six (6) months after the Effective Time shall be redelivered to Parent, and any Company Stockholders who have not theretofore complied with this Article II shall thereafter look only to Parent for the Merger Consideration to which they are entitled pursuant to Section 2.1 (and any amounts payable pursuant to Sections 2.1(f) and/or Section 2.3). Any portion of the Exchange Fund remaining unclaimed by Company Stockholders as of a date that is immediately prior to such time as such amounts would otherwise escheat to or become property of any government entity shall, to the extent permitted by applicable Law, become the property of Parent free and clear of any claims or interest of any person previously entitled thereto. To the fullest extent permitted by Law, neither Parent nor the Surviving Corporation shall be liable to any Company Stockholder for shares of Parent Common Stock, cash or other property delivered from the Exchange Fund to a public official pursuant to any applicable abandoned property, escheat or similar Law.

(f) Notwithstanding anything to the contrary contained herein, and in particular Sections 2.1(a) and this Section 2.2, Parent shall be bound by and fulfill any contractual obligations to any limited number of shareholders of Company who may by virtue of a contract between the Company and such shareholder be entitled to a different (larger or smaller) number of shares of Parent Common Stock than that prescribed by Section 2.1(a). Parent shall give special instructions to the Exchange Agent with respect to such shareholders and shall adjust the number of shares (up or down) to be received by all other shareholders of the Company on a pro rata basis.

(g) Notwithstanding anything to the contrary contained herein, each Person entitled to receive shares of Parent Company Stock under this Section 2.2 shall receive them on the condition and subject to the requirement that (A) 65% of such shares may not be sold (but may be transferred (i) by gift to an immediate family member, (ii) by will or intestacy or distribution or (iii) to a trust for the benefit of the transferor or a family member) until the first anniversary of the Closing Date and the certificates evidencing such shares shall have a legend reflecting such restriction, and (B) the remaining 35% of such shares may be freely sold or transferred even within the first year following the Closing Date so long as shares of Parent Common Stock are traded on the NASDAQ Capital Market and in the event such shares cease to be traded on the NASDAQ Capital Market (or another U.S. market or exchange with no less stringent listing requirements) during such first year, Parent shall have the right to impose a stop order for the remainder of such first year on the transfer of all such shares then held by Persons who were shareholders of the Company as of the Closing Date.

(h) Notwithstanding anything to the contrary contained herein, no certificates representing shares of Parent Common Stock shall be delivered to a Person who is an “affiliate” of Company for purposes of Rule 145 under the Securities Act of 1933 (the “Securities Act”) until such Person has executed and delivered to Parent a written agreement substantially in the form attached hereto as Exhibit C (the “Affiliate Agreement”)

2.3 Distributions with Respect to Unexchanged Company Shares. Notwithstanding any other provisions of this Agreement, no dividends or other distributions on shares of Parent Common Stock shall be paid with respect to any Company Share until such Company Share is surrendered for exchange as provided herein. Subject to the effect of applicable Laws, following surrender of any such Company Shares there shall be paid to the record holder of shares of Parent Common Stock issued in exchange therefor, without interest, (a) at the time of such surrender, the amount of dividends or other distributions with a record date after the Effective Time theretofore payable with respect to such shares of Parent Common Stock and not paid, less the amount of any withholding taxes which may be required thereon, and (b) at the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time but prior to surrender thereof and a payment date subsequent to surrender thereof payable with respect to such shares of Parent Common Stock, less the amount of any withholding taxes which may be required thereon. No Company Stockholder shall be entitled, until the surrender of such Certificate, to vote the shares of Parent Common Stock which such holder shall have the right to receive pursuant to this Article II.

2.4 No Further Ownership Rights in Company Common Stock. The payment of the relevant portion of the Merger Consideration in respect of each Company Share (and any

amounts payable pursuant to Sections 2.1(e) and/or Section 2.3) shall be deemed to have been issued (and paid) in full satisfaction of all rights pertaining to each such Company Share, and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of Company Shares which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented for transfer to the Surviving Corporation, they shall be canceled and exchanged for certificates representing shares of Parent Common Stock in accordance with the procedures set forth in this Article II.

2.5 Lost, Stolen or Destroyed Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed, and, if required by the Surviving Corporation or the Exchange Agent, the posting by such Person of a bond, in such reasonable amount as the Surviving Corporation or Exchange Agent may direct, as indemnity against any claim that may be made against it with respect to such Certificate and the payment of any fee charged by the Exchange Agent for such service, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate the number of shares of Parent Common Stock (and cash, if any) to which the holder thereof is entitled pursuant to Sections 2.1 and 2.2.

2.6 Dissenters’ Rights.

(a) Notwithstanding anything in this Agreement to the contrary, any shares of Company Common Stock held by any Company Stockholder who shall have demanded and not lost or withdrawn, or who shall be eligible to demand, appraisal rights with respect to such shares of Company Common Stock in the manner provided in the DGCL (“Dissenting Shares”) shall not represent the right to receive any portion of the Merger Consideration. If any Company Stockholder shall fail to perfect or shall effectively withdraw or lose his right to appraisal and payment under the DGCL, as the case may be, each share of Company Common Stock held by such Company Stockholder shall thereupon, in accordance with and subject to the provisions set forth in this Article II, represent the right to receive its portion of the Merger Consideration.

(b) Both Company and Parent, as the case may be, shall give one another prompt notice of any demands for appraisal received by Company or Parent, withdrawals of such demands and any other communications received by Company or Parent in connection with any demands for appraisal. Company may voluntarily make any payment with respect to any such demands. Company shall have the right to control all negotiations and proceedings with respect to demands for appraisal, including the right to settle any such demands.

2.7 Withholding. Each of the Surviving Corporation, Parent and the Exchange Agent shall be entitled to deduct and withhold from the consideration payable pursuant to this Agreement to any holder of shares of Company Common Stock or Dissenting Shares such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code or any provision of applicable state, local or foreign Tax Law. To the extent that amounts are so withheld by the Surviving Corporation, Parent or the Exchange Agent, as the case may be, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of shares of Company Common Stock or Dissenting Shares in respect of which such deduction and withholding was made by the Surviving Corporation, Parent or the Exchange Agent, as the case may be.

2.8 Company Stock Options. At the Effective Time, each Company Stock Option outstanding shall, by virtue of the Merger and without any further action on the part of Company or the holder thereof, be assumed by Parent (each, a “Replacement Option”). To the extent that they replace options which qualify as “incentive stock options,” each Replacement Option will be intended to qualify as an “incentive stock option” under the Code (although Parent makes no representation and warranty whatsoever that such options will so qualify). Each Replacement Option shall be subject to the same terms and conditions as the applicable Company Stock Option it replaced, except that, provided the relevant Company Stock Option does not otherwise provide, (a) each such Replacement Option shall be exercisable for, and represent the right to acquire, that whole number of shares of Parent Common Stock (rounded down to the nearest whole share) equal to the number of shares of Company Common Stock subject to such Company Stock Option multiplied by the Exchange Multiple, and (b) the exercise price per share of Parent Common Stock shall be an amount equal to the exercise price per share of the shares of Company Common Stock subject to such Company Stock Option in effect immediately prior to the Effective Time divided by the Exchange Multiple (the exercise price per share, as so determined, being rounded up to the nearest full cent). Parent shall reserve for issuance a sufficient number of shares of Parent Common Stock for delivery upon exercise of the Replacement Options granted in accordance with this Section 2.8. “Company Stock Option” means an option to purchase shares of Company Common Stock.

2.9 Company Warrants. At the Effective Time, each outstanding warrant to purchase shares of Company Common Stock (each, a “Company Warrant”) shall, to the extent that such Company Warrant does not expire in accordance with its terms upon consummation of the Merger, be converted into a warrant to acquire, on the same terms and conditions as were applicable under such Company Warrant, provided the relevant Company Warrant does not otherwise provide, that number of shares of Parent Common Stock (rounded down to the nearest whole share) equal to the number of shares of Company Common Stock subject to such Company Warrant multiplied by the Exchange Multiple (such new warrant, the “Replacement Warrant”), at an exercise price per share (rounded up to the nearest whole cent) equal to (y) the exercise price per share of Company Common Stock subject to such Company Warrant divided by (z) the Exchange Multiple. Any restriction on exercise of any Company Warrant shall continue in full force and effect and the term, exercisability, schedule and other provisions of such Company Warrant shall continue in full force and effect. At or prior to the Effective Time, Company shall take all reasonable action, if any, necessary with respect to each Company Warrant to permit the replacement of such Company Warrant by Parent pursuant to this Section 2.9 and to ensure that holders of Company Warrants have no rights with respect thereto greater than those specifically provided herein.

2.10 Company Exchangeable Shares. At the Effective Time, each outstanding exchangeable share issued by Cryptometrics Canada, Inc. (or issuable pursuant to outstanding options or warrants therefor) which is exchangeable for Company Common Stock (each, a “Company Exchangeable Share”) shall be converted into the right to acquire, on the same terms and conditions as were applicable under such Company Exchangeable Share, provided the relevant Company Exchangeable Share does not otherwise provide, that number of shares of Parent Common Stock (rounded down to the nearest whole share) equal to the number of shares of Company Common Stock subject to such Company Exchangeable Share multiplied by the Exchange Multiple. Any restriction on exercise of any Company Exchangeable Share shall

continue in full force and effect and the term, exchangeability, schedule and other provisions of such Company Exchangeable Share shall continue in full force and effect. At or prior to the Effective Time, Company and its Canadian subsidiary and Parent shall take all reasonable action, if any, necessary with respect to each Company Exchangeable Share to permit the proper modifications of such Company Exchangeable Share by Company, its Canadian Subsidiary and Parent pursuant to this Section 2.10 and the agreements relating to the Company Exchangeable Shares so as to ensure that holders of Company Exchangeable Shares have no rights with respect thereto greater or lesser than those specifically provided herein and in such agreements.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL STOCKHOLDERS

Each of the Principal Stockholders, severally and not jointly, represents and warrants to Parent and Merger Sub that the statements contained in this Article III are true and correct.

3.1 Principal Stockholders’ Authority Relative to the Operative Agreements. Such Principal Stockholder has all legal right, power and capacity to execute and deliver and to perform his obligations under this Agreement and the Operative Agreements to which he is a party and to consummate the Merger and the transactions contemplated hereby and thereby.

3.2 Execution; Enforceability. This Agreement and each of the Operative Agreements to which he is a party has been duly executed and delivered by such Principal Stockholder. This Agreement and each of such Operative Agreements to which he is a party constitutes a legal, valid and binding obligation of such Principal Stockholder, enforceable against such Principal Stockholder in accordance with its terms, except as the enforceability thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting or relating to creditors’ rights generally, and (ii) the availability of injunctive relief and other equitable remedies.

3.3 Title to Securities of Company. Such Principal Stockholder is the record and beneficial owner of the securities of Company shown as owned by such Principal Stockholder in the Company Lock Up and Voting Agreement, and immediately prior to the Effective Time, such Principal Stockholder will own such securities free and clear of all liens, claims, charges, security interests, mortgages, pledges, easements, conditional sale or other title retention agreements, defects in title, covenants or other restrictions of any kind, including, any restrictions on the use, voting, transfer or other attributes of ownership (collectively, “Liens”), other than the rights of Parent and Merger Sub under this Agreement. The rights of a Principal Stockholder to transfer its securities in Company remains subject to any restrictions imposed on such transfer by federal and/or state securities laws and regulations.

3.4 No Conflicts. The execution and delivery by such Principal Stockholder of this Agreement and each of the Operative Agreements to which he is a party does not, and the performance by such Principal Stockholder of his obligations under this Agreement and such Operative Agreements and the consummation of the transactions contemplated hereby and thereby did not, do not and will not:

(a) subject to obtaining the consents, approvals and actions, making the filings and giving the notices referred to in Section 3.5 below, if any, conflict with or result in a violation or breach of any term or provision of any Law or Order applicable to such Principal Stockholder or any of his assets and properties; or

(b) (i) conflict with or result in a violation or breach of, (ii) constitute (with or without notice or lapse of time or both) a default under, (iii) require such Principal Stockholder to obtain any consent, approval or action of, make any filing with or give any notice to any Person as a result or under the terms of, (iv) result in or give to any Person any right of termination, cancellation, acceleration or modification in or with respect to, (v) result in or give to any Person any additional rights or entitlement to increased, additional, accelerated or guaranteed payments under, or (vi) result in the creation or imposition of any Lien upon such Principal Stockholder or any of his assets and properties under, any Contract to which such Principal Stockholder is a party or by which any of his assets and properties is bound.

3.5 Governmental Approvals and Filings.

(a) No consent, approval or action of, filing with or notice to any Governmental or Regulatory Authority on the part of such Principal Stockholder is required in connection with the execution, delivery and performance of this Agreement or any of the Operative Agreements to which he is a party or the consummation of the transactions contemplated hereby and thereby.

(b) Except as disclosed in the Parent Disclosure Schedule and with the exception of the filing by Parent of the Form S-4 Registration Statement with the Securities and Exchange Commission (the “SEC”) and such filings required in accordance with state securities blue sky laws in connection with the issuance of shares of Parent Common Stock pursuant to the Merger (including any amendments or supplements thereto, the “Form S-4 Registration Statement”), no consent, approval or action of, filing with or notice to any Governmental or Regulatory Authority on the part of Parent is required in connection with the execution, delivery and performance of this Agreement or any of the Operative Documents to which Parent is a party or the consummation of the transactions contemplated hereby and thereby.

3.6 Legal Proceedings. There are no Actions pending or, to the knowledge of such Stockholder, threatened against, relating to or affecting either such Principal Stockholder or any of his assets and properties which (a) could reasonably be expected to result in the issuance of an Order restraining, enjoining or otherwise prohibiting or making illegal any of the transactions contemplated hereby or thereby or otherwise result in a material diminution of the benefits contemplated by this Agreement or any of the Operative Agreements to Parent, Merger Sub, Company or the Surviving Corporation or (b) if determined adversely to such Principal Stockholder, could reasonably be expected to result in (i) any injunction or other equitable relief against Parent, Merger Sub, Company, the Surviving Corporation or such Principal Stockholder or (ii) losses by Parent, Merger Sub, Company or the Surviving Corporation.

3.7 Other Negotiations; Brokers. Neither such Principal Stockholder nor any of his Affiliates (nor any investment banker, financial advisor, attorney, accountant or other Person retained by or acting for or on behalf of either such Principal Stockholder or any such Affiliate)

(a) has entered into any agreement that conflicts with any of the transactions contemplated hereby or (b) has entered into any agreement or had any discussions with any third party regarding any transaction involving such Principal Stockholder which could result in the Surviving Corporation, Parent, Merger Sub or any general partner, limited partner, stockholder, officer, director, employee, agent or Affiliate of any of them being subject to any claim for liability to said third party as a result of entering into this Agreement or the Operative Agreements or consummating the transactions contemplated hereby and thereby. There is no investment banker, broker, finder, financial advisor or other intermediary which has been retained by or is authorized to act on behalf of any Principal Stockholder who is entitled to any fee or commission in connection with the transactions contemplated by this Agreement, except as set forth in Section 4.23. No claim exists or will exist against the Principal Stockholders, or the Surviving Corporation or, based on any action by the Principal Stockholders, against Parent for payment of any “topping,” “break-up” or “bust-up” fee or any similar compensation or payment arrangement as a result of the transactions contemplated hereby.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF COMPANY

Except as set forth in the disclosure schedule dated and delivered as provided in Section 7.2(b) hereof by Company to Parent (the “Company Disclosure Schedule”), which is being concurrently delivered to Parent in connection herewith and is designated therein as being Company Disclosure Schedule, Company represents and warrants to Parent and Merger Sub that the statements contained in this Article IV are true and correct. Company Disclosure Schedule shall be arranged in paragraphs corresponding to each representation and warranty set forth in this Article IV.

4.1 Organization and Good Standing. Company is a corporation duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation, has all requisite power to own, lease and operate its properties and to carry on its business as now being conducted, and is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which it owns or leases property or conducts any business so as to require such qualification, except for those jurisdictions where the failure to be so qualified and in good standing would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Company. Company has delivered to Parent prior to the date of this Agreement true and complete copies of (i) its Charter Documents and (ii) all other existing written consents and minutes of the meetings of its stockholders, its Board of Directors and each committee of its Board of Directors held since January 1, 2002. There are no decisions or resolutions of the stockholders, Board of Directors or committees of the Board of Directors of Company, other than as disclosed in the minutes and written consents provided to Parent. Such Charter Documents are in full force and effect and Company is not in default of any provision thereunder. “Charter Documents” means, with respect to any entity, the certificate of incorporation, the articles of incorporation, by-laws, articles of organization, limited liability company agreement, partnership agreement, formation agreement, joint venture agreement or other similar organizational documents of such entity (in each case, as amended).

4.2 Capitalization.

(a) The authorized capital stock of Company consists of 20,000,000 shares of Company Common Stock, of which 11,199,103 shares of Company Common Stock were issued and outstanding as of July 31, 2005. All issued and outstanding shares of Company Common Stock have been duly authorized and validly issued, are fully paid and nonassessable, and were issued in substantial compliance with all applicable federal, state and foreign securities Laws. No shares of Company Common Stock are held by any Subsidiary of Company. No shares of Company Common Stock are held in Company’s treasury.

(b) Company has duly reserved 1,236,816 shares of Company Common Stock for future issuance pursuant to Company Stock Options (650,000 shares) and pursuant to Company Warrants (586,816 shares).

(c) Company has also duly reserved 1,500,000 shares of Company Common Stock for future issuance upon the exchange of outstanding Company Exchangeable Shares (1,382,957 shares already included in the outstanding shares noted in Section 4.2(a) above) and certain options (86,038 shares) and certain warrants (31,005 shares) to purchase such Company Exchangeable Shares.

(d) Except for (i) the shares of Company Common Stock outstanding as of the date hereof, (ii) Company Stock Options outstanding as of the date hereof, (iii) Company Warrants outstanding as of the date hereof and (iv) the other options, warrants, purchase rights, subscription rights, conversion rights, exchange rights and other Contracts that, directly or indirectly, could require Company to issue, sell or otherwise cause to become outstanding shares of Company Common Stock (including Company Exchangeable Shares) that are disclosed in Schedule 4.2(d)(iv) of the Company Disclosure Schedule (the “Other Company Purchase Rights”), Company does not have outstanding securities of any kind. Except as set forth in the preceding sentence, Company is not a party to any Contract obligating Company, directly or indirectly, to issue additional securities. As of the Effective Time, there will be no more than an aggregate of 4,000,000 shares of Company Common Stock that are then subject to Company Stock Options, Company Warrants or Other Company Purchase Rights.

(e) All outstanding Company Stock Options, Company Warrants and Other Company Purchase Rights have been duly authorized and validly issued and were issued in substantial compliance with all applicable federal, state and foreign securities Laws. All shares of Company Common Stock subject to issuance upon exercise, conversion and/or exchange of Company Stock Options, Company Warrants and Other Company Purchase Rights, upon issuance in accordance with the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable.

(f) No Company Stock Option, Company Warrant or Other Company Purchase Right will by its terms require an adjustment in connection with the Merger, except as contemplated by this Agreement. Neither the consummation of the transactions contemplated by this Agreement, nor any action taken or to be taken by Company in connection with such transactions, will result in (i) any acceleration of exercisability or vesting or lapse of restrictions (including any right to acceleration of vesting or lapse of restrictions that is contingent upon the occurrence of a subsequent event) in favor of any holder of Company Stock Options or Company Warrants, (ii) any additional benefits for any holder of Company Stock Options or Company

Warrants, or (iii) the inability of Parent after the Effective Time to exercise any right or benefit held by Company prior to the Effective Time with respect to any Company Stock Option assumed by Parent or any Company Warrant.

(g) None of the shares of Company Common Stock, Company Stock Options, Company Warrants or Other Company Purchase Rights were issued or have been transferred in violation of, or are subject to, any preemptive rights, rights of first offer or subscription agreements. Company is not a party to any stockholder agreements, voting agreements, voting trusts or any such other similar arrangements with respect to the transfer, voting or other rights associated with its securities and to the knowledge of Company, there are no such agreements, trusts or arrangements to which Company is not a party.

(h) Except for the repurchase at cost of the shares of Company Common Stock from employees of Company and its subsidiaries in connection with the termination of their employment, since January 1, 2002, Company has not repurchased or otherwise reacquired any of its securities. The repurchase of any such securities was duly approved and authorized by the Board of Directors and complied in all respects with applicable Law, and Company has no liability, contingent or otherwise, to make any payments with respect to any such repurchased securities. There are no obligations, contingent or otherwise, of Company to repurchase, redeem or otherwise acquire any of its securities. There are no declared or accrued unpaid dividends with respect to any of Company’s securities.

(i) Company does not have outstanding or authorized any stock appreciation, phantom stock, profit participation, or similar rights.

(j) Company does not have outstanding any bonds, debentures, notes or other obligations or debt or equity securities the holders of which have the right to vote (or convertible into, or exercisable or exchangeable for, securities having the right to vote) on any matter, except for Company Exchangeable Shares and Company Stock Options and Company Warrants as set forth in 4.2(b) and (c).

(k) Since January 1, 2002 Company has not repurchased or otherwise reacquired any of its securities. There are no obligations, contingent or otherwise, of Company to repurchase, redeem or otherwise acquire any of its securities. There are no declared or accrued unpaid dividends with respect to any of Company’s securities.

4.3 Subsidiaries of Company.

(a) Company Disclosure Schedule contains a true and complete list of the Subsidiaries of Company and sets forth with respect to each such Subsidiary the jurisdiction of formation. The outstanding shares of capital stock of each Subsidiary of Company have been duly authorized and validly issued, are fully paid and nonassessable and are owned by Company or another Subsidiary of Company free and clear of all Liens.

(b) Each Subsidiary of Company is validly existing and in good standing under the Laws of the jurisdiction of its formation, has all requisite power to own, lease and operate its properties and to carry on its business as now being conducted and is duly qualified to do business and is in good standing in each jurisdiction in which it owns or leases property or

conducts any business so as to require such qualification, except for those jurisdictions where the failure to be so qualified and in good standing would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Company.

(c) Other than the shares of capital stock set forth in Company Disclosure Schedule, no Subsidiary of Company has outstanding securities of any kind. No Subsidiary of Company is party to any Contract obligating such Subsidiary, directly or indirectly, to issue any additional securities.

(d) Except with respect to the exchangeable securities referred to in Section 4.2(j) above, no Subsidiary of Company has outstanding any bonds, debentures, notes or other obligations or debt or equity securities the holders of which have the right to vote (or convertible into, or exercisable or exchangeable for, securities having the right to vote) on any matter.

(e) Other than the Subsidiaries set forth in Company Disclosure Schedule, neither Company nor any Subsidiary of Company, directly or indirectly, owns any securities or other interest in any corporation, partnership, joint venture or other business association or entity.

(f) Except with respect to the exchangeable securities referred to in Section 4.2(j) above, there are no obligations, contingent or otherwise, of Company or any Subsidiary of Company to provide funds to or make an investment (in the form of a loan, capital contribution or otherwise) in any entity.

4.4 Authority and Enforceability.

(a) Company has all necessary corporate power and authority to enter into this Agreement and the Operative Agreements, and, subject in the case of the consummation of the Merger to Company Stockholder Approval, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Company of this Agreement and the Operative Agreements and the consummation by Company of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of Company, subject in the case of the consummation of the Merger to Company Stockholder Approval. The only stockholder approval required for the adoption of this Agreement is the delivery to Company of written consents in favor of adoption of this Agreement from the holders of a majority of the outstanding shares of Common Stock (the “Company Stockholder Approval”). This Agreement has been duly executed and delivered by Company and, assuming Company Stockholder Approval and due authorization, execution and delivery by Parent and Merger Sub, constitutes the valid and binding obligation of Company, enforceable against it in accordance with its terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting or relating to creditors’ rights generally, and (ii) the availability of injunctive relief and other equitable remedies.

(b) The Board of Directors of Company has, by the unanimous vote of all directors then in office, (i) approved this Agreement and the transactions contemplated hereby, (ii) determined that the Merger is advisable and in the best interests of Company Stockholders and (iii) resolved to recommend that Company Stockholders adopt this Agreement and directed

that this Agreement be submitted to Company Stockholders for adoption. Such resolutions have not been rescinded and are in full force and effect.

4.5 No Conflict; Authorizations.

(a) The execution and delivery of this Agreement and the Operative Agreements by Company do not, and the performance by Company of its obligations hereunder and thereunder and the consummation by Company of the transactions contemplated hereby and thereby (in each case, with or without the giving of notice or lapse of time, or both) will not, directly or indirectly, (i) violate the provisions of Company’s or any of its Subsidiaries’ Charter Documents, (ii) violate or conflict with, or constitute a default, an event of default or an event creating rights of acceleration, termination, cancellation, imposition of additional obligations or loss of rights, or require a consent to assignment, under any Contract (A) to which Company or any of its Subsidiaries is a party, (B) of which Company or any of its Subsidiaries is a beneficiary or (C) by which Company or any of its Subsidiaries or any of their respective assets is bound, (iii) assuming compliance by Company with the matters referred to in Section 4.5(b), violate or conflict with any Law, Authorization or Order applicable to Company or any of its Subsidiaries, or give any Governmental Entity or other Person the right to challenge any of the transactions contemplated hereby or to exercise any remedy, obtain any relief under or revoke or otherwise modify any rights held under, any such Law, Authorization or Order, or (iv) result in the creation of any Liens upon any of the assets owned or used by Company or any of its Subsidiaries referred to in clauses (iii) and (iv) that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Company. Section 4.5(a) of Company Disclosure Schedule sets forth all consents, waivers, assignments and other approvals and actions that are required in connection with the transactions contemplated by this Agreement under any Contract to which Company or any of its Subsidiaries is a party (collectively, “Company Consents”) in order to preserve all rights of, and benefits to, the Surviving Corporation and its Subsidiaries thereunder.

(b) No Authorization or Order of, registration, declaration or filing with, or notice to any Governmental Entity is required to be made, obtained, performed or given to or with respect to Company or any of its Subsidiaries in connection with the execution and delivery of this Agreement and the consummation of the Merger, except for (i) the filing of the Form S-4 Registration Statement with the SEC in connection with the issuance of shares of Parent Common Stock pursuant to the Merger, (ii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, (iii) requisite state “Blue Sky” filings, (iv) such filings as may be required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”) and the antitrust and competition Laws of all jurisdictions other than those of the United States (the “Other Antitrust Laws”) and (v) such Authorizations, Orders, registrations, declarations, filings and notices the failure to obtain or make which would not reasonably be expected to materially impair the ability of Company to perform its obligations under this Agreement and consummate the Merger or to be material to Company and its Subsidiaries taken as a whole.

4.6 Financial Statements.

(a) True and complete copies of Company’s audited consolidated financial statements consisting of the consolidated balance sheet of Company and its Subsidiaries as at April 30 in each of the years 2004 and 2005 and the related statements of income and retained earnings, stockholders’ equity and cash flow, for the years then ended (the “Audited Financial Statements”), and unaudited consolidated financial statements consisting of the balance sheet of Company and its Subsidiaries as at July 31, 2005 and the related statements of income and retained earnings, stockholders’ equity and cash flow for the three (3) month period then ended (the “Interim Financial Statements” and together with the Audited Financial Statements, the “Financial Statements”), are included in Company Disclosure Schedule.

(b) The Financial Statements are true, complete and correct and have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) applied on a consistent basis throughout the periods involved, subject, in the case of the Interim Financial Statements, to normal year-end adjustments (the effect of which will not be materially adverse) and the absence of notes (that, if presented, would not differ materially from those presented in the Audited Financial Statements). The Financial Statements are based on the books and records of Company and its Subsidiaries, and fairly present the financial condition of Company and its Subsidiaries as of the respective dates they were prepared and the results of the operations of Company and its Subsidiaries for the periods indicated. The consolidated balance sheet of Company and its Subsidiaries as of April 30, 2005 is referred to herein as the “Balance Sheet” and the date thereof as the “Balance Sheet Date” and the consolidated balance sheet of Company and its Subsidiaries as of July 31, 2005 is referred to herein as the “Interim Balance Sheet” and the date thereof as the “Interim Balance Sheet Date.” Each of Company and its Subsidiaries maintains a standard system of accounting established and administered in accordance with GAAP.

4.7 No Undisclosed Liabilities. Company and its Subsidiaries have no liabilities, obligations or commitments of any nature whatsoever, asserted or unasserted, known or unknown, absolute or contingent, accrued or unaccrued, matured or unmatured or otherwise (“Liabilities”), except (a) those which are adequately reflected or reserved against in the Balance Sheet as of the Balance Sheet Date, and (b) those which have been incurred in the ordinary course of business and consistent with past practice since the Balance Sheet Date and which are not, individually or in the aggregate, material in amount.

4.8 Taxes.

(a) As used in this Agreement, the following words and terms have the following definitions:

(i) “Tax” or “Taxes” means any and all federal, state, local, or foreign net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value added, franchise, bank shares, withholding, payroll, employment, excise, property, deed, stamp, alternative or add-on minimum, environmental, profits, windfall profits, transaction, license, lease, service, service use, occupation, severance, energy, unemployment, social security, workers’ compensation, capital, premium, and other taxes, assessments, customs, duties, fees,

levies, or other governmental charges of any nature whatever, whether disputed or not, together with any interest, penalties, additions to tax, or additional amounts with respect thereto.

(ii) “Tax Returns” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

(iii) “Taxing Authority” means any Governmental Entity having jurisdiction with respect to any Tax.

(b) Each of Company and its Subsidiaries has duly and timely filed all Tax Returns required to have been filed by or with respect to Company or such Subsidiary and will duly and timely file all Tax Returns due between the date hereof and the Closing Date. Each such Tax Return correctly and completely reflects all liability for Taxes and all other information required to be reported thereon. All Taxes owed by Company and each Subsidiary of Company (whether or not shown on any Tax Return) have been timely paid (or, if due between the date hereof and the Closing Date, will be duly and timely paid). Each of Company and its Subsidiaries has adequately provided for, in its books of account and related records, all liability for all unpaid Taxes, being current Taxes not yet due and payable.

(c) Each of Company and its Subsidiaries has withheld and timely paid all Taxes required to have been withheld and paid by it and has complied with all information reporting and backup withholding requirements, including maintenance of required records with respect thereto.

(d) Neither Company nor any of its Subsidiaries is the beneficiary of any extension of time within which to file any Tax Return, nor has Company or any of its Subsidiaries made (or had made on its behalf) any requests for such extensions. Neither Company nor any of its Subsidiaries has waived (or is subject to a waiver of) any statute of limitations in respect of Taxes or has agreed to (or is subject to) any extension of time with respect to a Tax assessment or deficiency.

(e) Company Disclosure Schedule indicates those Tax Returns that have been audited and those Tax Returns that currently are the subject of audit. Except as set forth in Company Disclosure Schedule there is no Action now pending or threatened against or with respect to Company or any of its Subsidiaries in respect of any Tax or any assessment or deficiency. There are no liens for Taxes (other than current Taxes not yet due and payable) upon the assets of Company. Company has made available to Parent correct and complete copies of all federal income Tax Returns, examination reports, and statements of deficiencies assessed against or agreed to by Company or any of its Subsidiaries since January 1, 2003.

(f) Company Disclosure Schedule lists, as of the date of this Agreement, all jurisdictions in which Company or any of its Subsidiaries currently files Tax Returns. No claim has been made by an authority in a jurisdiction where Company or any of its Subsidiaries does not file Tax Returns that any of them is or may be subject to taxation by that jurisdiction or that any of them must file Tax Returns.

(g) None of the assets or properties of Company or any of its Subsidiaries constitutes tax-exempt bond financed property or tax-exempt use property within the meaning of Section 168 of the Code. Neither Company nor any of its Subsidiaries is a party to any “safe harbor lease” within the meaning of Section 168(f)(8) of the Code, as in effect prior to amendment by the Tax Equity and Fiscal Responsibility Act of 1982, or to any “long-term contract” within the meaning of Section 460 of the Code. Neither Company nor any of its Subsidiaries has ever been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code. Company is not a “foreign person” within the meaning of Section 1445 of the Code.

(h) Neither Company nor any of its Subsidiaries has agreed to or is required to make by reason of a change in accounting method or otherwise, or could be required to make by reason of a proposed or threatened change in accounting method or otherwise, any adjustment under Section 481(a) of the Code. Neither Company nor any of its Subsidiaries has been the “distributing corporation” (within the meaning of Section 355(c)(2) of the Code) with respect to a transaction described in Section 355 of the Code within the 5-year period ending as of the date of this Agreement.

(i) No Subsidiary of Company that is incorporated in a non-U.S. jurisdiction has, or at any time has had, an investment in “United States property” within the meaning of Section 956(c) of the Code. No Subsidiary of Company is, or at any time has been, a passive foreign investment company within the meaning of Section 1297 of the Code and neither Company nor any of its Subsidiaries is a shareholder, directly or indirectly, in a passive foreign investment company. No Subsidiary of Company that is incorporated in a non-U.S. jurisdiction is, or at any time has been, engaged in the conduct of a trade or business within the United States, or treated as or considered to be so engaged.

(j) Neither Company nor any of its Subsidiaries (i) has ever been a party to any Tax allocation or sharing agreement or Tax indemnification agreement, (ii) has ever been a member of an affiliated, consolidated, condensed or unitary group, or (iii) has any liability for or obligation to pay Taxes of any other Person under Treas. Reg. 1.1502-6 (or any similar provision of Tax Law), or as transferee or successor, by contract or otherwise. Neither Company nor any of its Subsidiaries is a party to any joint venture, partnership, or other arrangement that is treated as a partnership for federal income tax purposes.

(k) Neither Company nor any of its Subsidiaries will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Effective Time as a result of any: (i) intercompany transactions or excess loss accounts described in Treasury regulations under Section 1502 of the Code (or any similar provision of state, local, or foreign Tax Law), (ii) installment sale or open transaction disposition made on or prior to the Effective Time or (iii) prepaid amount received on or prior to the Effective Time.

(l) Company has not entered into any transaction that constitutes a “reportable transaction” within the meaning of Treasury Regulation Section 1.6011-4(b).

(m) Company Disclosure Schedule lists each person who Company reasonably believes is, with respect to Company or any Affiliate of Company, a “disqualified individual” (within the meaning of Section 280G of the Code and the Regulations thereunder).

(n) Neither Company nor, to the Knowledge of Company, any of its Affiliates has taken or agreed to take any action (other than actions contemplated by this Agreement) that would reasonably be expected to prevent the Merger from constituting a “reorganization” under Section 368 of the Code. Company is not aware of any agreement or plan to which Company or any of its Affiliates is a party or other circumstances relating to Company or any of its Affiliates that could reasonably be expected to prevent the Merger from so qualifying as a “reorganization” under Section 368 of the Code.

(o) The unpaid Taxes of Company (i) did not, as of the Balance Sheet Date and the Interim Balance Sheet Date, exceed the reserve for Tax liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the Balance Sheet or the Interim Balance Sheet, respectively, (rather than in any notes thereto) and (ii) will not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of Company in filing its Tax Returns. Since the Balance Sheet Date Company has not incurred any liability for Taxes arising from extraordinary gains or losses, as that term is used in GAAP, outside the ordinary course of business consistent with past custom and practice.

4.9 Compliance with Law.

(a) Each of Company and its Subsidiaries has complied with each, and is not in violation of, any applicable Law to which Company or any of its Subsidiaries or its business, operations, assets or properties is or has been subject, except where failure to do so would not have a Material Adverse Effect on Company.

(b) No event has occurred and no circumstances exist that (with or without the passage of time or the giving of notice) may result in a violation of, conflict with or failure on the part of Company or any of its Subsidiaries to comply with, any Law. Neither Company nor any of its Subsidiaries has received notice regarding any such violation of, conflict with, or failure to comply with, any Law.

4.10 Authorizations.

(a) Each of Company and its Subsidiaries owns, holds or lawfully uses in the operation of its business all Authorizations which are necessary for it to conduct its business as currently conducted or as proposed to be conducted or for the ownership and use of the assets owned or used by Company or such Subsidiary in the conduct of its business free and clear of all Liens. Such Authorizations are valid and in full force and effect and none of such Authorizations will be terminated or impaired or become terminable as a result of the transactions contemplated by this Agreement. All material Authorizations are listed in Company Disclosure Schedule.

withdrawal, termination, cancellation, suspension or modification of any Authorization. Neither Company nor any of its Subsidiaries has received notice regarding any violation of, conflict with, failure to comply with the terms of, or any revocation, withdrawal, termination, cancellation, suspension or modification of, any Authorization. Neither Company nor any of its Subsidiaries is in default, nor has Company or any of its Subsidiaries received notice of any claim of default, with respect to any Authorization.

(c) No Person other than Company or one of its Subsidiaries owns or has any proprietary, financial or other interest (direct or indirect) in any Authorization which Company or any of its Subsidiaries owns, possesses or uses in the operation of its business as now or proposed to be conducted.

4.11 Title to Personal Properties.

(a) With respect to personal properties and assets that they purport to own, including all properties and assets reflected as owned on Company Balance Sheet (other than inventory sold and items of obsolete equipment disposed of in the ordinary course of business since the date thereof), Company or one of its Subsidiaries has good and valid title to all of such properties and assets, free and clear of all Liens other than Permitted Liens. “Permitted Liens” means, with respect to any party, (i) liens for current real or personal property taxes not yet due and payable and with respect to which such party maintains adequate reserves, (ii) workers’, carriers’ and mechanics’ or other like liens incurred in the ordinary course of business with respect to which payment is not due and that do not impair the conduct of such party’s or any of its Subsidiaries’ business in any material respect or the present or proposed use of the affected property and (iii) liens that are immaterial in character, amount, and extent and which do not detract from the value or interfere with the present or proposed use of the properties they affect.

(b) With respect to personal properties and assets that are leased, Company or one of its Subsidiaries has a valid leasehold interest in such properties and assets and all such leases are in full force and effect and constitute valid and binding obligations of the other party(ies) thereto. Neither Company nor any of its Subsidiaries nor any other party thereto is in violation of any of the terms of any such lease.

4.12 Condition of Tangible Assets. All buildings, plants, leasehold improvements, structures, facilities, equipment and other items of tangible property and assets which are owned, leased or used by Company or any of its Subsidiaries are structurally sound, are in good operating condition and repair (subject to normal wear and tear given the use and age of such assets), are usable in the regular and ordinary course of business and conform in all material respects to all Laws and Authorizations relating to their construction, use and operation.

4.13 Real Property.

(a) Company Disclosure Schedule contains (i) a list of all real property and interests in real property owned in fee by Company or any of its Subsidiaries (the “Company Owned Real Property”), and (ii) a list of all real property and interests in real property leased by Company or any of its Subsidiaries with respect to each of which the annual rental payments exceed $50,000 (the “Company Leased Real Property”).

(b) With respect to each parcel of Company Owned Real Property, Company or one of its Subsidiaries has good and marketable title to each such parcel of Company Owned Real Property free and clear of all Liens, except (A) Permitted Liens and (B) zoning and building restrictions, easements, covenants, rights-of-way and other similar restrictions of record, none of which materially impairs the current or proposed use of such Company Owned Real Property. There are no outstanding options or rights of first refusal to purchase such parcel of Company Owned Real Property, or any portion thereof or interest therein.

(c) Each lease with respect to Company Leased Real Property (each, a “Company Lease”) is in full force and effect. Neither Company nor any of its Subsidiaries is in default under any such Company Lease and, to Company’s Knowledge, no other party thereto is in default under any such Company Lease.

4.14 Intellectual Property. The representations and warranties in this Section 4.14 shall be true and correct except to the extent that errors and omission therein would not have a Material Adverse Effect on the Company.

(a) As used in this Agreement, “Intellectual Property” means: (i) inventions (whether or not patentable), trade secrets, technical data, databases, customer lists, designs, tools, methods, processes, technology, ideas, know-how, source code, product road maps and other proprietary information and materials (“Proprietary Information”); (ii) trademarks and service marks (whether or not registered), trade names, logos, trade dress and other proprietary indicia and all goodwill associated therewith; (iii) documentation, advertising copy, marketing materials, web-sites, specifications, mask works, drawings, graphics, databases, recordings and other works of authorship, whether or not protected by Copyright; (iv) computer programs, including any and all software implementations of algorithms, models and methodologies, whether in source code or object code, design documents, flow-charts, user manuals and training materials relating thereto and any translations thereof (collectively, “Software”); and (v) all forms of legal rights and protections that may be obtained for, or may pertain to, the Intellectual Property set forth in clauses (i) through (iv) in any country of the world (“Intellectual Property Rights”), including all letters patent, patent applications, provisional patents, design patents, PCT filings, invention disclosures and other rights to inventions or designs (“Patents”), all registered and unregistered copyrights in both published and unpublished works (“Copyrights”), all trademarks, service marks and other proprietary indicia (whether or not registered) (“Marks”), trade secret rights, mask works, moral rights or other literary property or authors rights, and all applications, registrations, issuances, divisions, continuations, renewals, reissuances and extensions of the foregoing.

(b) Company Disclosure Schedule lists (by name, owner and, where applicable, registration number and jurisdiction of registration, application, certification or filing) all Intellectual Property that is owned by Company and/or one or more of its Subsidiaries (whether exclusively, jointly with another Person or otherwise) (“Company Owned Intellectual Property”); provided that Company Disclosure Schedule is not required to list items of Company Owned Intellectual Property which are both (i) immaterial to Company and its Subsidiaries and (ii) not registered or the subject of an application for registration. Except as described in Company Disclosure Schedule, Company or one of its Subsidiaries owns the entire right, title and interest to all Company Owned Intellectual Property free and clear of all Liens.

(c) Company Disclosure Schedule lists all licenses, sublicenses and other Contracts (“Company In-Bound Licenses”) pursuant to which a third party authorizes Company or any of its Subsidiaries to use, practice any rights under, or grant sublicenses with respect to, any Intellectual Property owned by such third party, including the incorporation of any such Intellectual Property into Company’s or any of its Subsidiaries’ products and, with respect to each Company In-Bound License, whether Company In-Bound License is exclusive or non-exclusive; provided, however, that Company Disclosure Schedule is not required to list Company In-Bound Licenses that consist solely of “shrink-wrap” and similar commercially available end-user licenses.

(d) Company Disclosure Schedule lists all licenses, sublicenses and other Contracts (“Company Out-Bound Licenses”) pursuant to which Company or any of its Subsidiaries authorizes a third party to use, practice any rights under, or grant sublicenses with respect to, any Company Owned Intellectual Property or pursuant to which Company or any of its Subsidiaries grants rights to use or practice any rights under any Intellectual Property owned by a third party and, with respect to each Company Out-Bound License, whether Company Out-Bound License is exclusive or non-exclusive.

(e) Each Company In-Bound License and each Company Out-Bound License is in full force and effect and valid and enforceable in accordance with its terms, except where any such failure to be in full force and effect and valid and enforceable would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Company. Neither Company nor any of its Subsidiaries has violated any provision of, or committed or failed to perform any act which, with or without the giving of notice or lapse of time, or both, would constitute a default in the performance, observance or fulfillment of any obligation, covenant, condition or other term contained in any Company In-Bound License or Company Out-Bound License, except where any such default would not reasonably be expected to have a Material Adverse Effect on Company, and neither Company nor any of its Subsidiaries has given or received notice to or from any Person relating to any such alleged or potential default that has not been cured.

(f) Company and/or one or more of its Subsidiaries (i) exclusively own the entire right, interest and title to all Intellectual Property that is used in or necessary for the businesses of Company and its Subsidiaries as they are currently conducted free and clear of Liens (including the design, manufacture, license and sale of all products currently under development or in production), or (ii) otherwise rightfully use or otherwise enjoy such Intellectual Property pursuant to the terms of a valid and enforceable Company In-Bound License that is listed in Company Disclosure Schedule or that is a “shrink-wrap” or similar commercially available end-user license. Company Owned Intellectual Property, together with Company’s and its Subsidiaries’ rights under Company In-Bound Licenses listed in Company Disclosure Schedule or that are “shrink-wrap” and similar commercially available end-user licenses (collectively, the “Company Intellectual Property”), constitutes all the Intellectual Property used in or necessary for the operation of Company’s and its Subsidiaries’ businesses as they are currently conducted.

(g) All registration, maintenance and renewal fees related to Patents, Marks, Copyrights and any other certifications, filings or registrations that are owned by Company or

any of its Subsidiaries (“Company Registered Items”) that are currently due have been paid and all documents and certificates related to such Company Registered Items have been filed with the relevant Governmental Entity or other authorities in the United States or foreign jurisdictions, as the case may be, for the purposes of maintaining such Company Registered Items. All Company Registered Items are in good standing, held in compliance with all applicable legal requirements and enforceable by Company and/or one or more of its Subsidiaries. All Patents that have been issued to Company or any of its Subsidiaries are valid.

(h) Company is not aware of any challenges (or any basis therefor) with respect to the validity or enforceability of any Company Intellectual Property. Neither Company nor any of its Subsidiaries has taken any action or failed to take any action that would reasonably be expected to result in the abandonment, cancellation, forfeiture, relinquishment, invalidation, waiver or unenforceability of any Company Intellectual Property. Company Disclosure Schedule lists all previously held Company Registered Items that Company or any of its Subsidiaries has abandoned, cancelled, forfeited or relinquished during the twelve (12) months prior to the date of this Agreement.

(i) None of the products or services currently or formerly developed manufactured, sold, distributed, provided, shipped or licensed, by Company or any of its Subsidiaries, or which are currently under development, has infringed or infringes upon, or otherwise unlawfully used or uses, the Intellectual Property Rights of any third party. Neither Company nor any of its Subsidiaries, by conducting its business as currently conducted, has infringed or infringes upon, or otherwise unlawfully used or uses, any Intellectual Property Rights of a third party. Neither Company nor any of its Subsidiaries has received any communication alleging that Company or any of its Subsidiaries or any of their respective products, services, activities or operations infringe upon or otherwise unlawfully use any Intellectual Property Rights of a third party nor, to Company’s Knowledge, is there any basis therefor. No Action has been instituted, or, to Company’s Knowledge, threatened, relating to any Intellectual Property formerly or currently used by Company or any of its Subsidiaries and none of Company Intellectual Property is subject to any outstanding Order. To Company’s Knowledge, no Person has infringed or is infringing any Intellectual Property Rights of Company or any of its Subsidiaries or has otherwise misappropriated or is otherwise misappropriating any Company Intellectual Property.

(j) With respect to Company’s or any of its Subsidiaries’ Proprietary Information, the documentation relating thereto is current, accurate and sufficient in detail and content to identify and explain it and to allow its full and proper use without reliance on the special knowledge or memory of others. Company and its Subsidiaries have taken commercially reasonable steps to protect and preserve the confidentiality of all Proprietary Information owned by Company or any of its Subsidiaries that is not covered by an issued Patent. Without limiting the generality of the foregoing, the Proprietary Information of Company and its Subsidiaries (other than Proprietary Information that is covered by an issued Patent) is not part of the public knowledge and has not been used or divulged for the benefit of any Person other than Company and its Subsidiaries.

(k) All current and former employees, consultants and contractors of Company and its Subsidiaries have executed and delivered, and are in compliance with,

enforceable agreements regarding the protection of Proprietary Information and providing valid written assignments of all Intellectual Property conceived or developed by such employees, consultants or contractors in connection with their services for Company and its Subsidiaries. No current or former employee, consultant or contractor or any other Person has any right, claim or interest to any of Company Intellectual Property.

(l) No employee, consultant or contractor of Company or any of its Subsidiaries has been, is or will be, by performing services for Company or such Subsidiary, in violation of any term of any employment, invention disclosure or assignment, confidentiality, noncompetition agreement or other restrictive covenant or any Order as a result of such employee’s, consultant’s or independent contractor’s employment by Company or any Subsidiary or any services rendered by such employee, consultant or independent contractor.

(m) The execution and delivery of this Agreement by Company does not, and the consummation of the Merger (in each case, with or without the giving of notice or lapse of time, or both) will not, directly or indirectly, result in the loss or impairment of, or give rise to any right of any third party to terminate or reprice or otherwise renegotiate any of Company’s or any of its Subsidiaries’ rights to own any of its Intellectual Property or their respective rights under any Company Out-Bound License or Company In-Bound License, nor require the consent of any Governmental Entity or other third party in respect of any such Intellectual Property.

(n) Software.

(i) The Software owned, or purported to be owned by Company or any of its Subsidiaries (collectively, the “Company Owned Software”), was either (A) developed by employees of Company or one or more of its Subsidiaries within the scope of their employment by Company or such Subsidiary, (B) developed by independent contractors who have assigned all of their right, title and interest therein to Company or one of its Subsidiaries pursuant to written agreements or (C) otherwise acquired by Company or one of its Subsidiaries from a third party pursuant to a written agreement in which such third party assigns all of its right, title and interest therein. None of Company Owned Software contains any programming code, documentation or other materials or development environments that embody Intellectual Property Rights of any person other than Company and its Subsidiaries, other than such materials obtained by Company and its Subsidiaries from other Persons who make such materials generally available to all interested Persons or end-users on standard commercial terms.

(ii) Each of Company’s and its Subsidiaries’ existing and currently supported and marketed Software products performs, in all material respects, the functions described in any agreed specifications or end-user documentation or other information provided to customers of Company or such Subsidiary on which such customers relied when licensing or otherwise acquiring such products, subject only to routine bugs and errors that can be corrected promptly by Company or such Subsidiary in the course of providing customer support without further liability to Company or such Subsidiary, and all of the code of such products has been developed in a manner that meets common industry practice, including the use of regression test and release procedures. To Company’s Knowledge, each of Company’s and its Subsidiaries’ existing and currently supported and marketed Software products is free of all viruses, worms,

trojan horses and material known contaminants and does not contain any bugs, errors, or problems in each case that would substantially disrupt its operation or have a substantial adverse impact on the operation of the Software.

(iii) Company and its Subsidiaries have taken all actions customary in the software industry to document the Software and its operation, such that the materials comprising the Software, including the source code and documentation, have been written in a clear and professional manner so that they may be understood, modified and maintained in an efficient manner by reasonably competent programmers.

(iv) Neither Company nor any of its Subsidiaries has exported or transmitted Software or other material in connection with Company’s or such Subsidiaries’ business to any country to which such export or transmission is restricted by any applicable Law, without first having obtained all necessary and appropriate Authorizations.

(v) Company Owned Software is free of any disabling codes or instructions (a “Disabling Code”), and any virus or other intentionally created, undocumented contaminant (a “Contaminant”), that may, or may be used to, access, modify, delete, damage or disable any Systems or that may result in damage thereto. Company and its Subsidiaries have taken reasonable steps and implemented reasonable procedures to ensure that its and their internal computer systems used in connection with Company’s and its Subsidiaries’ business are free from Disabling Codes and Contaminants. The Software licensed by Company is free of any Disabling Codes or Contaminants that may, or may be used to, access, modify, delete, damage or disable any of the hardware, software, databases or embedded control systems of Company or its Subsidiaries (“Systems”) or that might result in damage thereto. Company and its Subsidiaries have taken all reasonable steps to safeguard their respective Systems and restrict unauthorized access thereto.

(vi) No Public Software: (A) forms part of any Company Intellectual Property; (B) was, or is, used in connection with the development of any Company Owned Intellectual Property or any products or services developed or provided by Company or any of its Subsidiaries; or (C) was, or is, incorporated or distributed, in whole or in part, in conjunction with Company Intellectual Property. “Public Software” means any software that contains, or is derived in any manner (in whole or in part) from, any software that is distributed as free software, open source software or similar licensing or distribution models, including software licensed or distributed under any of the following licenses or distribution models, or licenses or distribution models similar to any of the following: (i) GNU’s General Public License or Lesser/Library GPL; (ii) Mozilla Public License; (iii) Netscape Public License; (iv) Sun Community Source/ Industry Standard License; (v) BSD License; and (vi) Apache License.

4.15 Absence of Certain Changes or Events. Since Company Balance Sheet Date to the date of this Agreement:

(a) there has not been a Material Adverse Effect on Company;

(b) neither Company nor any of its Subsidiaries has amended or otherwise modified its Charter Documents;

(c) neither Company nor any of its Subsidiaries has declared, set aside or paid any dividend or other distribution (whether in cash, stock or property) with respect to any of its securities;

(d) neither Company nor any of its Subsidiaries has split, combined or reclassified any of its securities, or issued, or authorized for issuance, any securities except as set forth on the Company Disclosure Schedule;

(e) there has not been any material damage, destruction or loss with respect to the property and assets of Company or any of its Subsidiaries, whether or not covered by insurance;

(f) there has not been any revaluation of Company’s or any of its Subsidiaries’ assets, including writing down the value of inventory or writing off notes or accounts receivable, other than in the ordinary course of business consistent with past practice;

(g) neither Company nor any of its Subsidiaries has made any change in accounting practices; and

(h) neither Company nor any of its Subsidiaries has agreed, whether in writing or otherwise, to do any of the foregoing.

4.16 Contracts.

(a) Company Disclosure Schedule contains a complete and accurate list of each Contract or series of related Contracts to which Company or any of its Subsidiaries is a party or is subject, or by which any of their respective assets are bound:

(i) for the purchase of materials, supplies, goods, services, equipment or other assets and that involves or would reasonably be expected to involve (A) annual payments by Company or any of its Subsidiaries of $10,000 or more, or (B) aggregate payments by Company or any of its Subsidiaries of $10,000 or more;

(ii) (A) for the sale by Company or any of its Subsidiaries of materials, supplies, goods, services, equipment or other assets, and that provides for (1) a specified annual minimum dollar sales amount by Company or any of its Subsidiaries of $10,000 or more, or (2) aggregate payments to Company or any of its Subsidiaries of $10,000 or more, or (B) pursuant to which Company or any of its Subsidiaries received payments of more than $10,000 in the year ended April 30, 2005 or expects to receive payments of more than $10,000 in the year ending April 30, 2006;

(iii) that continues over a period of more than six (6) months from the date hereof and provides for payments to or by Company or any of its Subsidiaries exceeding $10,000, except for arrangements disclosed pursuant to the preceding subparagraphs (i) and (ii);

(iv) that is an employment, consulting, termination or severance Contract that involves or would reasonably be expected to involve the payment of $50,000 or more by Company or any of its Subsidiaries following the date hereof, except for any such

Contract that is terminable at-will by Company or any of its Subsidiaries without liability to Company or such Subsidiary;

(v) that is a distribution, dealer, representative or sales agency Contract, other than Contracts entered into in the ordinary course of business with distributors, representatives and sales agents that are cancelable without penalty on not more than ninety (90) days’ notice and does not deviate in any material respect from Company’s standard form previously provided to Parent;

(vi) that is a (A) Company Lease or (B) Contract for the lease of personal property, in each case which provides for payments to or by Company or any of its Subsidiaries in any one case of $75,000 or more annually or $250,000 or more over the term of such Company Lease or lease;

(vii) which provides for the indemnification by Company or any of its Subsidiaries of any Person, the undertaking by Company or any of its Subsidiaries to be responsible for consequential damages, or the assumption by Company or any of its Subsidiaries of any Tax, environmental or other Liability;

(viii) that is a note, debenture, bond, equipment trust, letter of credit, loan or other Contract for Indebtedness or lending of money (other than to employees for travel expenses in the ordinary course of business) or Contract for a line of credit or guarantee, pledge or undertaking of the Indebtedness of any other Person;

(ix) for any capital expenditure or leasehold improvement in any one case in excess of $10,000 or any such Contracts in the aggregate greater than $100,000;

(x) that restricts or purports to restrict the right of Company or any of its Subsidiaries to engage in any line of business, acquire any property, develop or distribute any product or provide any service (including geographic restrictions) or to compete with any Person or granting any exclusive distribution rights, in any market, field or territory;

(xi) that is a partnership, joint venture, joint development or similar Contract;

(xii) that relates to the acquisition or disposition of any business (whether by merger, sale of stock, sale of assets or otherwise);

(xiii) that is a collective bargaining Contract or other Contract with any labor organization, union or association; and

(xiv) that is a Contract or series of Contracts, the termination or breach of which would reasonably be expected to have a Material Adverse Effect on Company and not previously disclosed pursuant to this Section 4.16.

(b) Each Contract required to be listed in Schedule 4.16 of Company Disclosure Schedule (collectively, the “Company Material Contracts”) is in full force and effect and valid and enforceable in accordance with its terms, except to the extent a failure to be in full force and effect and valid or enforceable in accordance with its terms would not have a Material Adverse Effect on Company.

(c) Neither Company nor any of its Subsidiaries is, and to Company’s Knowledge, no other party thereto is, in default in the performance, observance or fulfillment of any obligation, covenant, condition or other term contained in any Company Material Contract, and neither Company nor any of its Subsidiaries has given or received notice to or from any Person relating to any such alleged or potential default that has not been cured. No event has occurred which with or without the giving of notice or lapse of time, or both, may conflict with or result in a violation or breach of, or give any Person the right to exercise any remedy under or accelerate the maturity or performance of, or cancel, terminate or modify, any Company Material Contract.

(d) Company has provided accurate and complete copies of each Company Material Contract to Parent.

(e) All Contracts other than Company Material Contracts to which Company or any of its Subsidiaries is a party or is subject, or by which any of their respective assets are bound (collectively, the “Company Minor Contracts”), are in all material respects valid and enforceable in accordance with their terms. Neither Company nor any of its Subsidiaries is in default in the performance, observance or fulfillment of any obligation, covenant or condition contained therein, and no event has occurred which with or without the giving of notice or lapse of time, or both, would constitute a default thereunder by Company or any of its Subsidiaries, except in either case where any such default or defaults could not reasonably be expected have, individually or in the aggregate, a Material Adverse Effect on Company taken as a whole.

4.17 Litigation. There is no action, suit or proceeding, claim, arbitration, litigation or investigation (each, an “Action”) pending or, to Company’s Knowledge, threatened against or affecting Company or any of its Subsidiaries that challenges or seeks to prevent, enjoin or otherwise delay the Merger. There is no Action against any current or, to Company’s Knowledge, former director or employee of Company or any of its Subsidiaries with respect to which Company or any of its Subsidiaries has or is reasonably likely to have an indemnification obligation. There is no unsatisfied judgment, penalty or award against or affecting Company or any of its Subsidiaries or any of their respective properties or assets. There is no Order to which Company or any of its Subsidiaries or any of their respective properties or assets is subject.

4.18 Employee Benefits.

(a) Company Disclosure Schedule sets forth a complete and accurate list of all Company Benefit Plans. A current, accurate and complete copy of each Company Benefit Plan has been provided to Parent. Neither Company nor any of its Subsidiaries has any intent or commitment to create any additional Company Benefit Plan or amend any Company Benefit Plan. “Benefit Plan” means any “employee benefit plan” as defined in 3(3) of the Employee Retirement Income Security Act of 1974 (“ERISA”), including any (a) nonqualified deferred

compensation or retirement plan or arrangement which is an Employee Pension Benefit Plan (as defined in ERISA Section 3(2)), (b) qualified defined contribution retirement plan or arrangement which is an Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or arrangement which is an Employee Pension Benefit Plan (including any Multiemployer Plan (as defined in ERISA Section 3(37)), (d) Employee Welfare Benefit Plan (as defined in ERISA Section 3(1)) or material fringe benefit plan or program, or (e) stock purchase, stock option, severance pay, employment, change-in-control, vacation pay, company awards, salary continuation, sick leave, excess benefit, bonus or other incentive compensation, life insurance, or other employee benefit plan, contract, program, policy or other arrangement, whether or not subject to ERISA. “Company Benefit Plan” means any Benefit Plan which is sponsored, maintained or contributed to by Company, any of its Subsidiaries or any Company ERISA Affiliate, or with respect to which Company, any of its Subsidiaries or any Company ERISA Affiliate otherwise has any present or future Liability. “Company ERISA Affiliate” means any entity which is a member of a “controlled group of corporations” with, under “common control” with or a member of an “affiliated services group” with, Company or any of its Subsidiaries, as defined in Section 414(b), (c), (m) or (o) of the Code.

(b) Each Company Benefit Plan has been and is currently administered in compliance in all material respects with its constituent documents and with all reporting, disclosure and other requirements of ERISA and the Code applicable to such Company Benefit Plan. Each Company Benefit Plan that is an Employee Pension Benefit Plan (as defined in Section 3(2) of ERISA) and which is intended to be qualified under Section 401(a) of the Code (a “Company Pension Plan”), has been determined by the Internal Revenue Service to be so qualified and no condition exists that would adversely affect any such determination. No Company Benefit Plan is a “defined benefit plan” as defined in Section 3(35) of ERISA.

(c) None of Company, any Subsidiary of Company, any Company ERISA Affiliate or any trustee or agent of any Company Benefit Plan has been or is currently engaged in any prohibited transactions as defined by Section 406 of ERISA or Section 4975 of the Code for which an exemption is not applicable which could subject Company, any Subsidiary of Company, any Company ERISA Affiliate or any trustee or agent of any Company Benefit Plan to the tax or penalty imposed by Section 4975 of the Code or Section 502 of ERISA.

(d) There is no event or condition existing which could be deemed a “reportable event” (within the meaning of Section 4043 of ERISA) with respect to which the thirty (30)-day notice requirement has not been waived. To Company’s Knowledge, no condition exists which could subject Company or any of its Subsidiaries to a penalty under Section 4071 of ERISA.

(e) None of Company, any Subsidiary of Company or any Company ERISA Affiliate is, or has been, party to any “multi-employer plan,” as that term is defined in Section 3(37) of ERISA.

(f) True and correct copies of the most recent annual report on Form 5500 and any attached schedules for each Company Benefit Plan (if any such report was required by applicable Law) and a true and correct copy of the most recent determination letter issued by the Internal Revenue Service for each Company Pension Plan have been provided to Parent.

(g) With respect to each Company Benefit Plan, there are no actions, suits or claims (other than routine claims for benefits in the ordinary course) pending or, to Company’s Knowledge, threatened against any Company Benefit Plan, Company, any Subsidiary of Company, any Company ERISA Affiliate or any trustee or agent of any Company Benefit Plan.

(h) With respect to each Company Benefit Plan to which Company, any Subsidiary of Company or any Company ERISA Affiliate is a party which constitutes a group health plan subject to Section 4980B of the Code, each such Company Benefit Plan complies, and in each case has complied, in all material respects with all applicable requirements of Section 4980B of the Code.

(i) Full payment has been made of all amounts which Company, any Subsidiary of Company or any Company ERISA Affiliate was required to have paid as a contribution to any Company Benefit Plan as of the last day of the most recent fiscal year of each of the Benefit Plans ended prior to the date of this Agreement, and none of Company Benefit Plans has incurred any “accumulated funding deficiency” (as defined in Section 302 of ERISA and Section 412 of the Code), whether or not waived, as of the last day of the most recent fiscal year of each such Company Benefit Plan ended prior to the date of this Agreement.

(j) Each Company Benefit Plan is, and its administration is and has been during the six-year period preceding the date of this Agreement, in all material respects in compliance with, and none of Company, any Subsidiary of Company or any Company ERISA Affiliate has received any claim or notice that any such Company Benefit Plan is not in material compliance with, all applicable Laws and Orders and prohibited transaction exemptions, including to the extent applicable, the requirements of ERISA.

(k) None of Company, any Subsidiary of Company and any Company ERISA Affiliate is in default in any material respect in performing any of its contractual obligations under any of Company Benefit Plans or any related trust agreement or insurance contract.

(l) There are no material outstanding Liabilities of any Company Benefit Plan other than Liabilities for benefits to be paid to participants in any Company Benefit Plan and their beneficiaries in accordance with the terms of such Company Benefit Plan.

(m) Subject to ERISA and the Code, each Company Benefit Plan may be amended, modified, terminated or otherwise discontinued by Company, a Subsidiary of Company or a Company ERISA Affiliate at any time without liability.

(n) No Company Benefit Plan other than a Company Pension Plan, retiree medical plan or severance plan provides benefits to any individual after termination of employment.

payment of any other benefits to any Person or the forgiveness of any Indebtedness of any Person, (iii) result in any prohibited transaction described in Section 406 of ERISA or Section 4975 of the Code for which an exemption is not available, or (iv) result in the payment or series of payments by Company or any of its Affiliates to any person of an “excess parachute payment” within the meaning of Section 280G of the Code.

(p) With respect to each Company Benefit Plan that is funded wholly or partially through an insurance policy, all premiums required to have been paid to date under the insurance policy have been paid, all premiums required to be paid under the insurance policy through the Closing will have been paid on or before the Closing and, as of the Closing, there will be no liability of Company, any Subsidiary of Company or any Company ERISA Affiliate under any insurance policy or ancillary agreement with respect to such insurance policy in the nature of a retroactive rate adjustment, loss sharing arrangement or other actual or contingent liability arising wholly or partially out of events occurring prior to the Closing.

(q) Each Company Benefit Plan that constitutes a “welfare benefit plan,” within the meaning of Section 3(1) of ERISA, and for which contributions are claimed by Company, any Subsidiary of Company or any Company ERISA Affiliate as deductions under any provision of the Code, is in compliance in all material respects with all applicable requirements pertaining to such deduction. With respect to any welfare benefit fund (within the meaning of Section 419 of the Code) related to a welfare benefit plan, there is no disqualified benefit (within the meaning of Section 4976(b) of the Code) that would result in the imposition of a tax under Section 4976(a) of the Code. All welfare benefit funds intended to be exempt from tax under Section 501(a) of the Code have been determined by the Internal Revenue Service to be so exempt and no event or condition exists which would adversely affect any such determination.

(r) Company Disclosure Schedule sets forth all Company Benefit Plans covering employees of Company or any of its Subsidiaries outside of the United States (the “Company Foreign Plans”). The Foreign Plans have been operated in accordance, and are in compliance, in all material respects with their constituent documents and all applicable Laws. There are no material unfunded Liabilities under or in respect of the Foreign Plans, and all contributions or other payments required to be made to or in respect of the Foreign Plans prior to the Closing Date have been made or will be made prior to the Closing Date.

4.19 Labor and Employment Matters.

(a) Neither Company nor any of its Subsidiaries is a party or subject to any labor union or collective bargaining Contract. There have not been since January 1, 2002 and there are not pending or threatened any labor disputes, work stoppages, requests for representation, pickets, work slow-downs due to labor disagreements or any actions or arbitrations which involve the labor or employment relations of Company or any of its Subsidiaries. There is no unfair labor practice, charge or complaint pending, unresolved or, to Company’s Knowledge, threatened before the National Labor Relations Board. No event has occurred or circumstance exist that may provide the basis of any work stoppage or other labor dispute.

(b) Each of Company and its Subsidiaries has complied in all material respects with each, and is not in violation in any material respect of any, Law relating to anti-discrimination and equal employment opportunities and there are, and have been, no material violations of any other Law respecting the hiring, hours, wages, occupational safety and health, employment, promotion, termination or benefits of any employee or other Person. Each of Company and its Subsidiaries has filed all reports, information and notices required under any Law respecting the hiring, hours, wages, occupational safety and health, employment, promotion, termination or benefits of any employee or other Person, and will timely file prior to Closing all such reports, information and notices required by any Law to be given prior to Closing.

(c) Each of Company and its Subsidiaries has paid or properly accrued in the ordinary course of business all wages and compensation due to employees, including all vacations or vacation pay, holidays or holiday pay, sick days or sick pay, and bonuses.

(d) Neither Company nor any of its Subsidiaries is a party to any Contract which restricts Company or any of its Subsidiaries from relocating, closing or terminating any of its operations or facilities or any portion thereof. Neither Company nor any of its Subsidiaries have since January 1, 2002 effectuated a “plant closing” (as defined in the Worker Adjustment and Retraining Notification Act of 1988 (the “WARN Act”)) or (ii) a “mass lay-off” (as defined in the WARN Act), in either case affecting any site of employment or facility of Company or any of its Subsidiaries, except in accordance with the WARN Act. The consummation of the Merger will not create liability for any act by Company or any of its Subsidiaries on or prior to the Closing Date under the WARN Act or any other Law respecting reductions in force or the impact on employees on plant closings or sales of businesses.

4.20 Environmental.

(a) As used in this Agreement, the following words and terms have the following definitions:

(i) “Environment” means all air, surface water, groundwater, land, including land surface or subsurface, including all fish, wildlife, biota and all other natural resources.

(ii) “Environmental Action” means any claim, proceeding or other Action brought or threatened under any Environmental Law or otherwise asserting that Company or any of its Subsidiaries has incurred Environmental Liabilities.

(iii) “Environmental Clean-up Site” means any location which is listed on the National Priorities List, the Comprehensive Environmental Response, Compensation and Liability Information System, or on any similar state or foreign list of sites requiring investigation or cleanup, or which is the subject of any pending or threatened Action related to or arising from any alleged violation of any Environmental Law, or at which there has been a threatened or actual Release of a Hazardous Substance.

(iv) “Environmental Laws” means any and all applicable Laws and Authorizations issued, promulgated or entered into by any Governmental Entity relating to the

Environment, worker health and safety, preservation or reclamation of natural resources, or to the management, handling, use, generation, treatment, storage, transportation, disposal, manufacture, distribution, formulation, packaging, labeling, Release or threatened Release of or exposure to Hazardous Substances, whether now existing or subsequently amended or enacted, including but not limited to: the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq. (“CERCLA”); the Federal Water Pollution Control Act, 33 U.S.C. Section 1251 et seq.; the Clean Air Act, 42 U.S.C. Section 7401 et seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; the Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq.; the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. Section 11001 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300(f) et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et seq.; the Federal Insecticide, Fungicide and Rodenticide Act 7 U.S.C. Section 136 et seq.; the Resource Conservation and Recovery Act of 1976 (“RCRA”), 42 U.S.C. Section 6901 et seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq.; and any similar or implementing state or local Law, and any non-U.S. Laws and regulations of similar import, and all amendments or regulations promulgated thereunder; and any common law doctrine, including but not limited to, negligence, nuisance, trespass, personal injury, or property damage related to or arising out of the presence, Release, or exposure to Hazardous Substances.

(v) “Environmental Liabilities” means, with respect to any party, Liabilities arising out of (A) the ownership or operation of the business of such party or any of its Subsidiaries or (B) the ownership, operation or condition of the Real Property or any other real property currently or formerly owned, operated or leased by such party or any of its Subsidiaries, in each case to the extent based upon or arising out of (i) Environmental Law, (ii) a failure to obtain, maintain or comply with any Environmental Permit, (iii) a Release of any Hazardous Substance, or (iv) the use, generation, storage, transportation, treatment, sale or other off-site disposal of Hazardous Substances.

(vi) “Environmental Permit” means any Authorization under Environmental Law, and includes any and all Orders issued or entered into by a Governmental Entity under Environmental Law.

(vii) “Hazardous Substances” means all explosive or regulated radioactive materials or substances, hazardous or toxic materials, wastes or chemicals, petroleum and petroleum products (including crude oil or any fraction thereof), asbestos or asbestos containing materials, and all other materials, chemicals or substances which are regulated by, form the basis of liability or are defined as hazardous, extremely hazardous, toxic or words of similar import, under any Environmental Law, including materials listed in 49 C.F.R. Section 172.101 and materials defined as hazardous pursuant to Section 101(14) of CERCLA.

(viii) “Release” means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, or disposing of Hazardous Substances into the Environment.

(b) Each of Company and its Subsidiaries has secured, and is in compliance in all material respects with, all Environmental Permits required in connection with its operations

and the Real Property. Each Environmental Permit, together with the name of the Governmental Entity issuing such Environmental Permit, is set forth in Company Disclosure Schedule. All such Environmental Permits are valid and in full force and effect and none of such Environmental Permits will be terminated or impaired or become terminable as a result of the Merger. Each of Company and its Subsidiaries has been, and are currently, in compliance in all material respects with all Environmental Laws. Neither Company nor any of its Subsidiaries has received notice alleging that Company or any of its Subsidiaries is not in such compliance with Environmental Laws.

(c) There are no past, pending or, to Company’s Knowledge, threatened Environmental Actions against or affecting Company or any of its Subsidiaries, and Company is not aware of any facts or circumstances which could be expected to form the basis for any Environmental Action against Company or any of its Subsidiaries.

(d) Neither Company nor any of its Subsidiaries has entered into or agreed to any Order, and neither Company nor any of its Subsidiaries is subject to any Order, relating to compliance with any Environmental Law or to investigation or cleanup of a Hazardous Substance under any Environmental Law.

(e) No Lien has been attached to, or asserted against, the assets, property or rights of Company or any of its Subsidiaries pursuant to any Environmental Law, and, to Company’s Knowledge, no such Lien has been threatened. There are no facts, circumstances or other conditions that could be expected to give rise to any Liens on or affecting any Real Property.

(f) There has been no treatment, storage, disposal or Release of any Hazardous Substance at, from, into, on or under any Real Property or any other property currently or formerly owned, operated or leased by Company or any of its Subsidiaries. No Hazardous Substances are present in, on, about or migrating to or from any Real Property that could be expected to give rise to an Environmental Action against Company or any of its Subsidiaries.

(g) Neither Company nor any of its Subsidiaries has received a CERCLA 104(e) information request nor has Company or any of its Subsidiaries been named a potentially responsible party for any National Priorities List site under CERCLA or any site under analogous state Law. Neither Company nor any of its Subsidiaries has received an analogous notice or request from any non-U.S. Governmental Entity.

(h) There are no aboveground tanks or underground storage tanks on, under or about the Real Property. Any aboveground or underground tanks previously situated on the Real Property or any other property currently or formerly owned, operated or leased by Company or any of its Subsidiaries have been removed in accordance with all Environmental Laws and no residual contamination, if any, remains at such sites in excess of applicable standards.

(i) There are no polychlorinated biphenyls (“PCBs”) leaking from any article, container or equipment on, under or about the Real Property and there are no such

articles, containers or equipment containing PCBs. There is no asbestos containing material or lead based paint containing materials in at, on, under or within the Real Property.

(j) Neither Company nor any of its Subsidiaries has transported or arranged for the treatment, storage, handling, disposal, or transportation of any Hazardous Material to any off-site location which is an Environmental Clean-up Site.

(k) None of the Real Property is an Environmental Clean-up Site.

(l) Company has provided to Parent true and complete copies of, or access to, all written environmental assessment materials and reports that have been prepared by or on behalf of Company or any of its Subsidiaries.

4.21 Related Party Transactions. There are no Contracts of any kind, written or oral, entered into by Company or any of its Subsidiaries with, or for the benefit of, any officer, director or stockholder of Company or, to the Knowledge of Company, any Affiliate of any of them, except in each case, for (a) employment agreements, indemnification agreements fringe benefits and other compensation paid to directors, officers and employees consistent with previously established policies (including normal merit increases in such compensation in the ordinary course of business) and copies of which have been provided to Parent and are listed on Company Disclosure Schedule, (b) reimbursements of ordinary and necessary expenses incurred in connection with their employment or service, (c) amounts paid pursuant to Company Benefit Plans of which copies have been provided to Parent and (d) the occupancy of certain of Company’s facilities which do not provide for the payment of significant amounts of rent. To the Knowledge of Company, none of such Persons has any material direct or indirect ownership interest in any firm or corporation with which Company or any of its Subsidiaries has a business relationship, or with any firm or corporation that competes with Company or any of its Subsidiaries (other than ownership of securities in a publicly traded company representing less than one percent of the outstanding stock of such company). No officer or director of Company or any of its Subsidiaries or member of his or her immediate family or greater than 5% stockholder of Company or, to the Knowledge of Company, any Affiliate of any of them or any employee of Company or any of its Subsidiaries is directly or indirectly interested in any Company Material Contract.

4.22 Insurance. All insurance policies, binders of insurance and fidelity bonds which cover Company or any of its Subsidiaries or their respective businesses, properties, assets, directors or employees (the “Company Policies”) are issued by an insurer that is financially sound and reputable, are in full force and effect and are enforceable in accordance with their terms. Such Company Policies provide adequate insurance coverage for Company and its Subsidiaries and their respective businesses, properties, assets and employees, and are sufficient in all material respects for compliance with all Laws and Contracts to which Company or any of its Subsidiaries is a party or by which it is bound. There are no material pending claims under any of such Company Policies as to which coverage has been questioned, denied or disputed by the insurer or in respect of which the insurer has reserved its rights.

4.23 Brokers or Finders. Company shall indemnify and hold harmless Parent and the officers and directors of Parent from any obligations or liabilities to any person or entity

engaged by or to whom the Company is liable for brokerage and/or finders fees for services rendered in connection with the Merger contemplated by this Agreement.

4.24 No Illegal Payments. None of Company, any of its Subsidiaries or, to the Knowledge of Company, any Affiliate, officer, agent or employee thereof, directly or indirectly, has, since inception, on behalf of or with respect to Company or any of its Subsidiaries, (a) made any unlawful domestic or foreign political contributions, (b) made any payment or provided services which were not legal to make or provide or which Company, any of its Subsidiaries or any Affiliate thereof or any such officer, employee or other Person should reasonably have known were not legal for the payee or the recipient of such services to receive, (c) received any payment or any services which were not legal for the payer or the provider of such services to make or provide, (d) had any material transactions or payments which are not recorded in its accounting books and records or (e) had any off-book bank or cash accounts or “slush funds.”

4.25 Information Supplied. None of the information supplied or to be supplied by or on behalf of Company for inclusion or incorporation by reference in the Form S-4 Registration Statement to be filed with the SEC by Parent in connection with the issuance of shares of Parent Common Stock pursuant to the Merger will, when filed or at any time it is amended or supplemented or at the time the Form S-4 Registration Statement becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading.

4.26 Antitakeover Statutes. Company has taken all action necessary to exempt the Merger, this Agreement, Company Lock-Up and Voting Agreements and the transactions contemplated hereby and thereby from Section 203 of the DGCL. Neither such Section nor any other anti-takeover or similar Law applies or purports to apply to any of those transactions. No other “control share acquisition,” “fair price,” “moratorium” or other anti-takeover Laws apply to this Agreement or any of the transactions contemplated hereby.

4.27 Compliance with Securities Laws. The offering and issuance by Company of shares of Company Common Stock, Company Stock Options and Company Warrants and the issuance of any shares upon exercise of Company Stock Options or Company Warrants, were made and completed in substantial compliance with all applicable state, federal and foreign securities Laws.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

Except as set forth in the disclosure schedule dated and delivered as provided in Section 7.2(b) of the date hereof by Parent to Company (the “Parent Disclosure Schedule”), which is being concurrently delivered to Company in connection herewith and is designated therein as being Parent Disclosure Schedule, Parent represents and warrants to Company that the statements contained in this Article V are true and correct. Parent Disclosure Schedule shall be arranged in paragraphs corresponding to each representation and warranty set forth in this Article V.

5.1 Organization and Good Standing. Each of Parent and its Subsidiaries is duly organized, validly existing and in good standing under the Laws of its jurisdiction of formation. Each of Parent and its Subsidiaries is duly qualified, licensed or admitted to do business and is in good standing in each jurisdiction in which the ownership, use or leasing of its assets and properties, or the conduct or nature of its business, makes such qualification, licensing or admission necessary, except for such failures to be so qualified, licensed or admitted and in good standing which, individually or in the aggregate, could not be reasonably expected to have a Material Adverse Effect on Parent.

5.2 Capitalization.

(a) The authorized capital stock of Parent consists solely of (a) 250,000,000 shares of Parent Common Stock, (b) 440,000 shares of Class B common stock, par value $0.00001 per share, of which 400,000 shares have been designated as Series 2 Class B common stock (“Parent Series 2 Class B Common Stock”) and 40,000 shares have been designated as Series 3 Class B Common Stock (“Parent Series 3 Class B Common Stock”) and (c) 50,000,000 shares of preferred stock, par value $0.00001 per share (“Parent Preferred Stock”). As of October 26, 2005: (i) 44,751,212 shares of Parent Common Stock were issued and outstanding, (ii) 380,829 shares of Parent Series 2 Class B Common Stock were issued and outstanding, (iii) 21,500 shares of Parent Series 3 Class B Common Stock were issued and outstanding, and (iv) no shares of Parent Preferred Stock were issued and outstanding. All of the issued and outstanding shares of Parent Common Stock have been duly authorized and are validly issued, fully paid, nonassessable and free of any preemptive rights with respect thereto. 6,000,000 shares of Parent Common Stock are reserved for issuance pursuant to the exercise of outstanding stock options. Schedule 5.2 of Parent sets forth all outstanding stock options relating to capital stock of Parent.

(b) The authorized capital stock of Merger Sub consists solely of one thousand (1,000) shares of common stock, par value $0.001 per share (“Merger Sub Common Stock”), of which one thousand (1,000) shares were issued and outstanding as of the date of this Agreement and owned by and registered in the name of Parent. All of the issued and outstanding shares of Merger Sub Common Stock have been duly authorized and are validly issued, fully paid, nonassessable and free of any preemptive rights with respect thereto. As of the date hereof, no shares of Merger Sub Common Stock are reserved for issuance pursuant to the exercise of outstanding stock options.

(d) Except for (i) the shares of Parent Common Stock outstanding as of the date hereof determined (mutatis mutandis) as provided in Section 2.1(a), (ii) the stock options for Parent Common Stock outstanding as of the date hereof, and (iii) the other options, warrants, purchase rights, subscription rights, conversion rights, exchange rights and other Contracts that, directly or indirectly, could require Company to issue, sell or otherwise cause to become outstanding shares of Parent Common Stock that are disclosed in Schedule 4.2 of Parent Disclosure Schedule, except for shares issuable under puts to pay off the Company’s outstanding $2,000,000 promissory note or shares issuable upon conversion of any convertible debenture (which may be issued in part in satisfaction of such promissory note) with a face amount not

exceeding $2,750,000 (the “Other Parent Purchase Rights”), Company does not have outstanding securities of any kind. Except as set forth in the preceding sentence, Parent is not a party to any Contract obligating Parent, directly or indirectly, to issue additional securities.

(e) All outstanding Parent stock options and Other Parent Purchase Rights have been duly authorized and validly issued and were issued in substantial compliance with all applicable federal, state and foreign securities Laws. All shares of Parent Common Stock subject to issuance upon exercise, conversion and/or exchange of Parent stock options and Other Parent Purchase Rights, upon issuance in accordance with the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable.

(f) No Parent stock option or Other Parent Purchase Right will by its terms require an adjustment in connection with the Merger, except as contemplated by this Agreement. Neither the consummation of the transactions contemplated by this Agreement, nor any action taken or to be taken by Company in connection with such transactions, will result in (i) any acceleration of exercisability or vesting or lapse of restrictions (including any right to acceleration of vesting or lapse of restrictions that is contingent upon the occurrence of a subsequent event) in favor of any holder of Parent stock options, (ii) any additional benefits for any holder of Parent stock options, or (iii) the inability of Parent after the Effective Time to exercise any right or benefit held by Parent prior to the Effective Time with respect to any Parent stock option.

(g) None of the shares of Parent Common Stock, Parent stock options or Other Parent Purchase Rights were issued or have been transferred in violation of, or are subject to, any preemptive rights, rights of first offer or subscription agreements. Parent is not a party to any stockholder agreements, voting agreements, voting trusts or any such other similar arrangements with respect to the transfer, voting or other rights associated with its securities and to the knowledge of Parent, there are no such agreements, trusts or arrangements to which Parent is not a party.

(h) There are no obligations, contingent or otherwise, of Parent to repurchase, redeem, or otherwise acquire any of its securities. There are no declared or accrued unpaid dividends with respect to Parent’s securities, except in connection with the Series 2 and Series 3 Class B shares of Parent.

(i) Parent does not have outstanding or authorized any stock appreciation, phantom stock, profit participation or similar rights.

(j) Except as set forth in the Parent Disclosure Schedule, Parent does not have any bonds, debentures, notes or other obligations or debt securities the holders of which would have a right to vote (or convertible into, or exercisable or exchangeable for, securities having the right to vote) on any matter.

5.3 Subsidiaries of Parent.

(a) Schedule 5.3 of the Parent Disclosure Schedule contains a true and complete list of the Subsidiaries of Parent as of the date hereof and sets forth with respect to each

such Subsidiary the jurisdiction of formation. The outstanding capital stock or membership interests of each Subsidiary of Parent have been duly authorized and validly issued, are fully paid and nonassessable and are owned by Parent or another Subsidiary of Parent free and clear of all Liens.

(b) Each Subsidiary of Parent is validly existing and in good standing under the Laws of the jurisdiction of its formation, has all requisite power to own, lease and operate its properties and to carry on its business as now being conducted and is duly qualified to do business and is in good standing in each jurisdiction in which it owns or leases property or conducts any business so as to require such qualification, except for those jurisdictions where the failure to be so qualified and in good standing would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Parent.

(c) Other than the shares of capital stock or membership interests set forth in the Parent Disclosure Schedule, no Subsidiary of Parent has outstanding securities of any kind. No Subsidiary of Parent is party to any Contract obligating such Subsidiary, directly or indirectly, to issue any additional securities.

(d) No Subsidiary of Parent has outstanding any bonds, debentures, notes or other obligations or debt or equity securities the holders of which have the right to vote (or convertible into, or exercisable or exchangeable for, securities having the right to vote) on any matter.

(e) Other than the Subsidiaries set forth in the Parent Disclosure Schedule, neither Parent nor any Subsidiary of Parent, directly or indirectly, owns any securities or other interest in any corporation, partnership, joint venture or other business association or entity.

(f) There are no obligations, contingent or otherwise, of Parent or any Subsidiary of Parent to provide funds to or make an investment (in the form of a loan, capital contribution or otherwise) in any entity.

5.4 Authority and Enforceability. Each of Parent and Merger Sub has full corporate power and authority to enter into this Agreement and the Operative Agreements to which it is a party, subject in the case of the issuance of shares of Parent Common Stock in the Merger to Parent Stockholder Approval and to perform its obligations hereunder and thereunder and to consummate the Merger. The execution, delivery and performance of this Agreement and the Operative Agreements to which it is a party by each of Parent and Merger Sub and the consummation by each of Parent and Merger Sub of the Merger have been duly and validly approved by their respective Board of Directors and no other corporate proceedings on the part of Parent or its stockholders or Merger Sub or Parent as its sole stockholder are necessary to authorize the execution, delivery and performance of this Agreement or the Operative Agreements to which it is a party by each of Parent and Merger Sub and the consummation by each of Parent and Merger Sub of the Merger. The affirmative votes of the holders of a majority of the outstanding shares of Parent Common Stock at a duly convened meeting of the Stockholders of Parent (the “Parent Stockholders’ Meeting”) (i) to approve the increase in the number of authorized shares of capital stock of Parent from 250,000,000 to 500,000,000 shares (the “Parent Authorized Stock Increase”) so as to permit the issuance of the shares of Parent

Common Stock pursuant to the Merger and (ii) to approve the change of Parent’s corporate name to Cryptometrics, Inc. (the “Parent Authorized Name Change”) (the “Parent Authorized Stock Increase” and the “Parent Authorized Name Change” are collectively referred to herein, from time to time as the “Parent Stockholder Approval”) are the only votes of the holders of any class of capital stock or other security necessary in connection with the Merger. This Agreement and the Operative Agreements to which it is a party have been duly and validly executed and delivered by each of Parent and Merger Sub and constitute legal, valid and binding obligations of Parent and Merger Sub enforceable against each of them in accordance with their respective terms, except as the enforceability thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting or relating to creditors’ rights generally, and (ii) the availability of injunctive relief and other equitable remedies.

5.5 No Conflicts; Authorizations.

(a) The execution and delivery of this Agreement and the Operative Agreements by Parent and Merger Sub do not, and the performance by Parent and Merger Sub of their obligations hereunder and thereunder and the consummation by Parent and Merger Sub of the transactions contemplated hereby and thereby will not, (i) violate the provisions of any of the Charter Documents of Parent or any of its Subsidiaries, (ii) violate or conflict with, or constitute a default, an event of default or an event creating rights of acceleration, termination, cancellation, imposition of additional obligations or loss of rights, or require a consent to assignment, under any Contract (A) to which Parent or any of its subsidiaries or Merger Sub is a party, (B) of which Parent or Merger Sub is a beneficiary or (C) by which Parent or Merger Sub or any of their respective assets is bound, (iii) assuming compliance by Parent with the matters referred to Section 5.5(b), violate any Law applicable to Parent or Merger Sub on the date hereof, or (iv) result in the creation of any Liens upon any of the assets owned or used by Parent or Merger Sub, other than such violations referred to in clauses (i), (ii) and (iii) and such Liens referred to in clause (iv) which would not reasonably be expected, individually or in the aggregate, materially to impair or delay the ability of Parent or Merger Sub to perform its obligations under this Agreement and consummate the Merger or to be material to Parent taken as a whole. Schedule 5.4(b) of Parent Disclosure Schedule sets forth all consents, waivers, assignments and other approvals and actions that are required in connection with the transactions contemplated by this Agreement under any Contract to which Parent or any of its Subsidiaries is a party (collectively, Parent or any of its Subsidiaries, “Parent Consents”).

(b) No Authorization or Order of, registration, declaration or filing with, or notice to any Governmental Entity, state or other jurisdiction is required by or with respect to Parent or any of its Subsidiaries in connection with the execution and delivery of this Agreement and the consummation of the Merger, except for (i) the filing of a Form S-4 Registration Statement with the Securities and Exchange Commission in connection with the issuance of Parent Common Stock pursuant to the Merger, (ii) such filings as may be required under the HSR Act and the Other Antitrust Laws, (iii) the filing of the Certificate of Merger with the Secretary of State of Delaware, (iv) such filings as may be required under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules of the NASDAQ Capital Market, (iv) such filings as may be required under state securities or “Blue Sky” laws, and (v) such Authorizations, Orders, registrations, declarations, filings and notices the failure to obtain or make which would not reasonably be expected to materially impair the ability of Parent or

Merger Sub to perform its obligations under this Agreement and consummate the Merger or to be material to Parent taken as a whole.

5.6 SEC Filings; Financial Statements.

(a) Parent has made available to Company all forms, reports and documents required to be filed by it with the SEC since August 1, 2004 (collectively, the “Parent SEC Reports”). Parent SEC Reports (i) at the time they were filed complied as to form in all material respects with the applicable requirements of the Securities Act or the Exchange Act, as the case may be, and (ii) did not at the time they were filed (or if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing) 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 were made, not misleading.

(b) The consolidated financial statements (including, in each case, any related notes) contained in Parent SEC Reports complied as to form in all material respects with the applicable rules and regulations of the SEC with respect thereto, were prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes to such financial statements or, in the case of unaudited statements, as permitted by the SEC) and fairly presented the consolidated financial position of Parent and its Subsidiaries as at the respective dates and the consolidated results of its operations and cash flows for the periods indicated (subject, in the case of the unaudited financial statements, to normal year-end recurring adjustments).

(c) Parent and its Subsidiaries have no Liabilities except (a) those which are adequately reflected or reserved against as noted above in the Financial Statements included in the most recently filed Parent SEC Report, and (b) those which have been incurred in the ordinary course of business and consistent with past practice since the last balance sheet date therein or which are not, individually or in the aggregate, material in amount.

5.7 Taxes.

(a) Parent (which shall for the purpose of this Section 5.7 include its Subsidiaries) has duly and timely filed all Tax Returns required to have been filed by or with respect to Parent and will duly and timely file all Tax Returns due between the date hereof and the Closing Date. Each such Tax Return correctly and completely reflects all liability for Taxes and all other information required to be reported thereon. All Taxes owed by Parent (whether or not shown on any Tax Return) have been timely paid (or, if due between the date hereof and the Closing Date, will be duly and timely paid). Parent has adequately provided for, in its books of account and related records, all liability for all unpaid Taxes, being current Taxes not yet due and payable.

(b) Parent has withheld and timely paid all Taxes required to have been withheld and paid by it and has complied with all information reporting and backup withholding requirements, including maintenance of required records with respect thereto.

(c) Parent is not the beneficiary of any extension of time within which to file any Tax Return, nor has Parent made (or had made on its behalf) any requests for such extensions. Parent has not waived (or is subject to a waiver of) any statute of limitations in respect of Taxes or has agreed to (or is subject to) any extension of time with respect to a Tax assessment or deficiency.

(d) Parent Disclosure Schedule indicates those Tax Returns that have been audited and those Tax Returns that currently are the subject of audit. Except as set forth in the Parent Disclosure Schedule there is no Action now pending or threatened against or with respect to Parent in respect of any Tax or any assessment or deficiency. There are no liens for Taxes (other than current Taxes not yet due and payable) upon the assets of Parent. Parent has made available to Company correct and complete copies of all federal income Tax Returns, examination reports, and statements of deficiencies assessed against or agreed to by Parent since January 1, 2003.

(e) Parent Disclosure Schedule lists, as of the date of this Agreement, all jurisdictions in which Parent currently files Tax Returns. No claim has been made by an authority in a jurisdiction where Parent does not file Tax Returns that it is or may be subject to taxation by that jurisdiction or that it must file Tax Returns.

(f) Parent has not filed consent pursuant to the collapsible corporation provisions of Section 341(f) of the Code (or any corresponding provisions of state, local or foreign income Tax Law). None of the assets or properties of Parent constitutes tax-exempt bond financed property or tax-exempt use property within the meaning of Section 168 of the Code. Parent is not a party to any “safe harbor lease” within the meaning of Section 168(f)(8) of the Code, as in effect prior to amendment by the Tax Equity and Fiscal Responsibility Act of 1982, or to any “long-term contract” within the meaning of Section 460 of the Code. Parent has never been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code. Parent is not is a “foreign person” within the meaning of Section 1445 of the Code.

(g) Parent has not agreed to or is required to make by reason of a change in accounting method or otherwise, or could be required to make by reason of a proposed or threatened change in accounting method or otherwise, any adjustment under Section 481(a) of the Code. Parent has not been the “distributing corporation” (within the meaning of Section 355(c)(2) of the Code) with respect to a transaction described in Section 355 of the Code within the 5-year period ending as of the date of this Agreement. Parent has not received (or is subject to) any ruling from any Taxing Authority or has entered into (or is subject to) any agreement with a Taxing Authority. Parent has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Section 6662 of the Code.

(h) Parent (i) has never been a party to any Tax allocation or sharing agreement or Tax indemnification agreement, (ii) has never been a member of an affiliated, consolidated, condensed or unitary group, and (iii) does not have any liability for or obligation to pay Taxes of any other Person under Treas. Reg. 1.1502-6 (or any similar provision of Tax Law),

or as transferee or successor, by contract or otherwise. Parent is not a party to any joint venture, partnership, or other arrangement that is treated as a partnership for federal income tax purposes.

(i) Parent will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Effective Time as a result of any: (i) intercompany transactions or excess loss accounts described in Treasury regulations under Section 1502 of the Code (or any similar provision of state, local, or foreign Tax Law), (ii) installment sale or open transaction disposition made on or prior to the Effective Time or (iii) prepaid amount received on or prior to the Effective Time.

(j) Parent has not entered into any transaction that constitutes a “reportable transaction” within the meaning of Treasury Regulation Section 1.6011-4(b).

(k) Parent Disclosure Schedule lists each person who Parent reasonably believes is, with respect to Parent or any Affiliate of Parent, a “disqualified individual” (within the meaning of Section 280G of the Code and the Regulations thereunder).

(l) Parent has not taken or agreed to take any action (other than actions contemplated by this Agreement) that would reasonably be expected to prevent the Merger from constituting a “reorganization” under Section 368 of the Code. Parent is not aware of any agreement or plan to which Parent is a party or other circumstances relating to Parent that could reasonably be expected to prevent the Merger from so qualifying as a “reorganization” under Section 368 of the Code.

5.8 Compliance with Law.

(a) Each of Parent and its Subsidiaries has complied with each, and is not in violation of, any applicable Law to which Parent or its business, operations, assets or properties are or have been subject, except where failure to do so would not have a Material Adverse Effect on Parent.

(b) No event has occurred and no circumstances exist that (with or without the passage of time or the giving of notice) may result in a violation of, conflict with or failure on the part of Parent or any of its Subsidiaries to comply with, any Law. Neither Parent nor any of its Subsidiaries has received notice regarding any such violation of, conflict with, or failure to comply with, any Law.

5.9 Authorizations.

(a) Parent and each of its Subsidiaries owns, holds or lawfully uses in the operation of its business all Authorizations which are necessary for it to conduct its business as currently conducted or as proposed to be conducted or for the ownership and use of the assets owned or used by Parent in the conduct of its business free and clear of all Liens. Such Authorizations are valid and in full force and effect and none of such Authorizations will be terminated or impaired or become terminable as a result of the transactions contemplated by this Agreement. All material Authorizations are listed in Parent Disclosure Schedule.

(b) No event has occurred and no circumstances exist that (with or without the passage of time or the giving of notice) may result in a violation of, conflict with, failure on the part of Parent or any of its Subsidiaries to comply with the terms of, or the revocation, withdrawal, termination, cancellation, suspension or modification of any Authorization. Parent and its Subsidiaries have not received notice regarding any violation of, conflict with, failure to comply with the terms of, or any revocation, withdrawal, termination, cancellation, suspension or modification of, any Authorization. Parent is not in default, nor has Parent received notice of any claim of default, with respect to any Authorization.

(c) No Person other than Parent or the applicable Subsidiary owns or has any proprietary, financial or other interest (direct or indirect) in any Authorization which Parent owns, possesses or uses in the operation of its business as now or proposed to be conducted.

5.10 Title to Personal Properties.

(a) With respect to personal properties and assets that they purport to own, (other than inventory sold and items of obsolete equipment disposed of in the ordinary course of business since the date thereof), Parent or the applicable Subsidiary has good and valid title to all of such properties and assets, free and clear of all Liens other than Permitted Liens.

(b) With respect to personal properties and assets that are leased by Parent or a Subsidiary, Parent or the applicable Subsidiary which leases the asset has a valid leasehold interest in such properties and assets and all such leases are in full force and effect and constitute valid and binding obligations of the other party(ies) thereto. Neither Parent nor any other party thereto is in violation of any of the terms of any such lease.

5.11 Condition of Tangible Assets. All buildings, plants, leasehold improvements, structures, facilities, equipment and other items of tangible property and assets which are owned, leased or used by Parent are structurally sound, are in good operating condition and repair (subject to normal wear and tear given the use and age of such assets), are usable in the regular and ordinary course of business and conform in all material respects to all Laws and Authorizations relating to their construction, use and operation.

5.12 Real Property.

(a) Schedule 5.12 of the Parent Disclosure Schedule contains (i) a list of all real property and interests in real property owned in fee by Parent or a Subsidiary (the “Parent and Subsidiary Owned Real Property”), and (ii) a list of all real property and interests in real property leased by Parent or a Subsidiary with respect to each of which the annual rental payments exceed $50,000 (the “Parent and Subsidiary Leased Real Property”).

(b) With respect to each parcel of Parent and Subsidiary Owned Real Property, Parent or the applicable Subsidiary has good and marketable title to each such parcel of Parent and Subsidiary Owned Real Property free and clear of all Liens, except (A) Permitted Liens and (B) zoning and building restrictions, easements, covenants, rights-of-way and other similar restrictions of record, none of which materially impairs the current or proposed use of such Parent or Subsidiary Owned Real Property. There are no outstanding options or rights of

first refusal to purchase such parcel of Parent and Subsidiary Owned Real Property, or any portion thereof or interest therein.

(c) Each lease with respect to Parent and Subsidiary Leased Real Property (each, a “Parent Lease”) is in full force and effect. Parent is not in default under any such Parent Lease and, to Parent’s Knowledge, no other party thereto is in default under any such Parent Lease.

5.13 Intellectual Property. The representations and warranties in this Section 5.13 shall be true and correct except to the extent that errors and omission therein would not have a Material Adverse Effect on the Parent. Each reference to Parent in this section shall also apply to each of its Subsidiaries separately and jointly.

(a) Parent Disclosure Schedule lists (by name, owner and, where applicable, registration number and jurisdiction of registration, application, certification or filing) all Intellectual Property that is owned by Parent (whether exclusively, jointly with another Person or otherwise) (“Parent Owned Intellectual Property”); provided that Parent Disclosure Schedule is not required to list items of Parent Owned Intellectual Property which are both (i) immaterial to Parent and (ii) not registered or the subject of an application for registration. Except as described in Parent Disclosure Schedule, Parent owns the entire right, title and interest to all Parent Owned Intellectual Property free and clear of all Liens.

(b) Parent Disclosure Schedule lists all licenses, sublicenses and other Contracts (“Parent In-Bound Licenses”) pursuant to which a third party authorizes Parent to use, practice any rights under, or grant sublicenses with respect to, any Intellectual Property owned by such third party, including the incorporation of any such Intellectual Property into Parent’s products and, with respect to each Parent In-Bound License, whether Parent In-Bound License is exclusive or non-exclusive; provided, however, that Parent Disclosure Schedule is not required to list Parent In-Bound Licenses that consist solely of “shrink-wrap” and similar commercially available end-user licenses.

(c) Parent Disclosure Schedule lists all licenses, sublicenses and other Contracts (“Parent Out-Bound Licenses”) pursuant to which Parent authorizes a third party to use, practice any rights under, or grant sublicenses with respect to, any Parent Owned Intellectual Property or pursuant to which Parent grants rights to use or practice any rights under any Intellectual Property owned by a third party and, with respect to each Parent Out-Bound License, whether Parent Out-Bound License is exclusive or non-exclusive.

(d) Each Parent In-Bound License and each Parent Out-Bound License is in full force and effect and valid and enforceable in accordance with its terms, except where any such failure to be in full force and effect and valid and enforceable would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Parent. Parent has not violated any provision of, or committed or failed to perform any act which, with or without the giving of notice or lapse of time, or both, would constitute a default in the performance, observance or fulfillment of any obligation, covenant, condition or other term contained in any Parent In-Bound License or Parent Out-Bound License, except where any such default would not reasonably be expected to have a Material Adverse Effect on Parent, and

Parent has not given or received notice to or from any Person relating to any such alleged or potential default that has not been cured.

(e) Parent (i) exclusively own the entire right, interest and title to all Intellectual Property that is used in or necessary for the businesses of Parent as they are currently conducted free and clear of Liens (including the design, manufacture, license and sale of all products currently under development or in production), or (ii) otherwise rightfully use or otherwise enjoy such Intellectual Property pursuant to the terms of a valid and enforceable Parent In-Bound License that is listed in Parent Disclosure Schedule or that is a “shrink-wrap” or similar commercially available end-user license. Parent Owned Intellectual Property, together with Parent’s rights under Parent In-Bound Licenses listed in Parent Disclosure Schedule or that are “shrink-wrap” and similar commercially available end-user licenses (collectively, the “Parent Intellectual Property”), constitutes all the Intellectual Property used in or necessary for the operation of Parent’s businesses as they are currently conducted.

(f) All registration, maintenance and renewal fees related to Patents, Marks, Copyrights and any other certifications, filings or registrations that are owned by Parent (“Parent Registered Items”) that are currently due have been paid and all documents and certificates related to such Parent Registered Items have been filed with the relevant Governmental Entity or other authorities in the United States or foreign jurisdictions, as the case may be, for the purposes of maintaining such Parent Registered Items. All Parent Registered Items are in good standing, held in compliance with all applicable legal requirements and enforceable by Parent. All Patents that have been issued to Parent are valid.

(g) Parent is not aware of any challenges (or any basis therefor) with respect to the validity or enforceability of any Parent Intellectual Property. Parent has not taken any action or failed to take any action that would reasonably be expected to result in the abandonment, cancellation, forfeiture, relinquishment, invalidation, waiver or unenforceability of any Parent Intellectual Property. Parent Disclosure Schedule lists all previously held Parent Registered Items that Parent has abandoned, cancelled, forfeited or relinquished during the twelve (12) months prior to the date of this Agreement.

(h) None of the products or services currently or formerly developed manufactured, sold, distributed, provided, shipped or licensed, by Parent, or which are currently under development, has infringed or infringes upon, or otherwise unlawfully used or uses, the Intellectual Property Rights of any third party. Parent, by conducting its business as currently conducted, has not infringed or infringes upon, or otherwise unlawfully used or uses, any Intellectual Property Rights of a third party. Parent has not received any communication alleging that Parent or any of its products, services, activities or operations infringe upon or otherwise unlawfully use any Intellectual Property Rights of a third party nor, to Parent’s Knowledge, is there any basis therefor. No Action has been instituted, or, to Parent’s Knowledge, threatened, relating to any Intellectual Property formerly or currently used by Parent and none of Parent Intellectual Property is subject to any outstanding Order. To Parent’s Knowledge, no Person has infringed or is infringing any Intellectual Property Rights of Parent or has otherwise misappropriated or is otherwise misappropriating any Parent Intellectual Property.

(i) With respect to Parent’s Proprietary Information, the documentation relating thereto is current, accurate and sufficient in detail and content to identify and explain it and to allow its full and proper use without reliance on the special knowledge or memory of others. Parent has taken commercially reasonable steps to protect and preserve the confidentiality of all Proprietary Information owned by Parent that is not covered by an issued Patent. Without limiting the generality of the foregoing, the Proprietary Information of Parent (other than Proprietary Information that is covered by an issued Patent) is not part of the public knowledge and has not been used or divulged for the benefit of any Person other than Parent.

(j) All current and former employees, consultants and contractors of Parent have executed and delivered, and are in compliance with, enforceable agreements regarding the protection of Proprietary Information and providing valid written assignments of all Intellectual Property conceived or developed by such employees, consultants or contractors in connection with their services for Parent. No current or former employee, consultant or contractor or any other Person has any right, claim or interest to any of Parent Intellectual Property.

(k) No employee, consultant or contractor of Parent has been, is or will be, by performing services for Parent, in violation of any term of any employment, invention disclosure or assignment, confidentiality, noncompetition agreement or other restrictive covenant or any Order as a result of such employee’s, consultant’s or independent contractor’s employment by Parent or any services rendered by such employee, consultant or independent contractor.

(l) The execution and delivery of this Agreement by Parent does not, and the consummation of the Merger (in each case, with or without the giving of notice or lapse of time, or both) will not, directly or indirectly, result in the loss or impairment of, or give rise to any right of any third party to terminate or reprice or otherwise renegotiate any of Parent’s rights to own any of its Intellectual Property or their respective rights under any Parent Out-Bound License or Parent In-Bound License, nor require the consent of any Governmental Entity or other third party in respect of any such Intellectual Property.

(m) Software.

Parent does not own the Software or purport to own any Software.

5.14 Absence of Certain Changes or Events. Since July 31, 2005 to the date of this Agreement:

(a) there has not been a Material Adverse Effect on Parent;

(b) neither Parent nor Merger Sub has amended or otherwise modified its Charter Documents;

(c) neither Parent nor Merger Sub has declared, set aside or paid any dividend or other distribution (whether in cash, stock or property) with respect to any of its securities;

(d) neither Parent nor merger Sub has split, combined or reclassified any of its securities, or issued, or authorized for issuance, any securities except for the grant of options to purchase shares of Parent Common Stock (“Parent Stock Options”) and the issuance of shares of Parent Common Stock upon exercise of Parent Stock Options and warrants issued by Parent, in each case, in the ordinary course of business consistent with past practice;

(e) there has not been any material damage, destruction or loss with respect to the property and assets of Parent, whether or not covered by insurance;

(f) there has not been any revaluation of Parent’s assets, including writing down the value of inventory or writing off notes or accounts receivable, other than in the ordinary course of business consistent with past practice;

(g) Parent has not made any change in accounting practices; and

(h) neither Parent nor Merger Sub has agreed, whether in writing or otherwise, to do any of the foregoing except that Parent may with Company’s prior consent and notification to Company within two (2) Business Days thereafter spin-off various assets to its shareholders as a dividend.

5.15 Contracts.

(a) Parent Disclosure Schedule contains a complete and accurate list of each Contract or series of related Contracts to which Parent or any of its Subsidiaries is a party or is subject, or by which any of their respective assets are bound:

(i) for the purchase of materials, supplies, goods, services, equipment or other assets and that involves or would reasonably be expected to involve (A) annual payments by Parent of $10,000 or more, or (B) aggregate payments by Parent of $10,000 or more;

(ii) (A) for the sale by Parent of materials, supplies, goods, services, equipment or other assets, and that provides for (1) a specified annual minimum dollar sales amount by Parent of $10,000 or more, or (2) aggregate payments to Parent of $10,000 or more, or (B) pursuant to which Parent received payments of more than $10,000 in the year ended July 31, 2005 or expects to receive payments of more than $10,000 in the year ending July 31, 2006;

(iii) that continues over a period of more than six (6) months from the date hereof and provides for payments to or by Parent exceeding $10,000, except for arrangements disclosed pursuant to the preceding subparagraphs (i) and (ii);

(iv) that is an employment, consulting, termination or severance Contract that involves or would reasonably be expected to involve the payment of $50,000 or more by Parent following the date hereof, except for any such Contract that is terminable at-will by Parent without liability to Parent;

(v) that is a distribution, dealer, representative or sales agency Contract, other than Contracts entered into in the ordinary course of business with distributors,

representatives and sales agents that are cancelable without penalty on not more than ninety (90) days’ notice and does not deviate in any material respect from Parent’s standard form previously provided by Parent;

(vi) that is a (A) Parent Lease or (B) Contract for the lease of personal property, in each case which provides for payments to or by Parent or any of its Subsidiaries in any one case of $75,000 or more annually or $250,000 or more over the term of such Parent Lease or lease;

(vii) which provides for the indemnification by Parent, the undertaking by Parent to be responsible for consequential damages, or the assumption by Parent of any Tax, environmental or other Liability;

(ix) for any capital expenditure or leasehold improvement in any one case in excess of $10,000 or any such Contracts in the aggregate greater than $100,000;

(x) that restricts or purports to restrict the right of Parent to engage in any line of business, acquire any property, develop or distribute any product or provide any service (including geographic restrictions) or to compete with any Person or granting any exclusive distribution rights, in any market, field or territory;

(xi) that is a partnership, joint venture, joint development or similar Contract;

(xii) that relates to the acquisition or disposition of any business (whether by merger, sale of stock, sale of assets or otherwise);

(xiii) that is a collective bargaining Contract or other Contract with any labor organization, union or association; and

(xiv) that is a Contract or series of Contracts, the termination or breach of which would reasonably be expected to have a Material Adverse Effect on Parent and not previously disclosed pursuant to this Section 5.15.

(b) Each Contract required to be listed in Schedule 5.15 of Parent Disclosure Schedule (collectively, “Parent Material Contracts”) is in full force and effect and valid and enforceable in accordance with its terms, except to the extent a failure to be in full force and effect and valid or enforceable in accordance with its terms would not have a Material Adverse Effect on the Parent or any of its Subsidiaries.

(c) Parent and its Subsidiaries are not, and to Parent’s Knowledge, no other party thereto is, in default in the performance, observance or fulfillment of any obligation, covenant, condition or other term contained in any Parent Material Contract, and Parent has not

given or received notice to or from any Person relating to any such alleged or potential default that has not been cured. No event has occurred which with or without the giving of notice or lapse of time, or both, may conflict with or result in a violation or breach of, or give any Person the right to exercise any remedy under or accelerate the maturity or performance of, or cancel, terminate or modify, any Parent Material Contract.

(d) Parent has provided accurate and complete copies of each Parent Material Contract to Parent.

(e) All Contracts other than Parent Material Contracts to which Parent or any of its Subsidiaries is a party or is subject, or by which any of their respective assets are bound (collectively, the “Parent Minor Contracts”), are in all material respects valid and enforceable in accordance with their terms. Parent is not in default in the performance, observance or fulfillment of any obligation, covenant or condition contained therein, and no event has occurred which with or without the giving of notice or lapse of time, or both, would constitute a default thereunder by Parent, except in either case where any such default or defaults could not reasonably be expected have, individually or in the aggregate, a Material Adverse Effect on Parent taken as a whole.

5.16 Legal Proceedings. Except as disclosed in Parent Disclosure Schedule, there are no actions or proceedings pending or, to the knowledge of Parent, threatened against, relating to or affecting Parent or any of its Subsidiaries or any of their assets or properties which (a) could reasonably be expected to result in the issuance of an Order restraining, enjoining or otherwise prohibiting or making illegal the Merger or otherwise result in a material diminution of the benefits contemplated by this Agreement to Parent, Merger Sub, Company or the Surviving Corporation or (b) if determined adversely to Parent or any of its Subsidiaries, could reasonably be expected to result in (i) any injunction or other equitable relief against Parent or any of its Subsidiaries, Merger Sub, Company or the Surviving Corporation or (ii) losses by Parent, Merger Sub, Company or the Surviving Corporation.

5.17 Employee Benefits.

(a) Parent Disclosure Schedule sets forth a complete and accurate list of all Parent Benefit Plans and benefit plans to which any of Parent’s Subsidiaries is a party or otherwise bound. A current, accurate and complete copy of each, benefit plan has been provided to the Company. Parent has no intent or commitment to create any additional Parent Benefit Plan or amend any Parent Benefit Plan. “Parent Benefit Plan” means any Benefit Plan which is sponsored, maintained or contributed to by Parent or any Parent ERISA Affiliate, or with respect to which Parent or any of its Subsidiaries or any Parent ERISA Affiliate otherwise has any present or future Liability. “Parent ERISA Affiliate” means any entity which is a member of a “controlled group of corporations” with, under “common control” with or a member of an “affiliated services group” with, Parent or any of its Subsidiaries, as defined in Section 414(b), (c), (m) or (o) of the Code.

(b) Each Parent Benefit Plan has been and is currently administered in compliance in all material respects with its constituent documents and with all reporting, disclosure and other requirements of ERISA and the Code applicable to such Parent Benefit

Plan. Each Parent Benefit Plan that is an Employee Pension Benefit Plan (as defined in Section 3(2) of ERISA) and which is intended to be qualified under Section 401(a) of the Code (a “Parent Pension Plan”), has been determined by the Internal Revenue Service to be so qualified and no condition exists that would adversely affect any such determination. No Parent Benefit Plan is a “defined benefit plan” as defined in Section 3(35) of ERISA.

(c) None of Parent, any Parent ERISA Affiliate or any trustee or agent of any Parent Benefit Plan has been or is currently engaged in any prohibited transactions as defined by Section 406 of ERISA or Section 4975 of the Code for which an exemption is not applicable which could subject Parent or any Parent ERISA Affiliate or any trustee or agent of any Parent Benefit Plan to the tax or penalty imposed by Section 4975 of the Code or Section 502 of ERISA.

(d) There is no event or condition existing which could be deemed a “reportable event” (within the meaning of Section 4043 of ERISA) with respect to which the thirty (30)-day notice requirement has not been waived. To Parent’s Knowledge, no condition exists which could subject Parent to a penalty under Section 4071 of ERISA.

(e) Neither Parent nor or any Parent ERISA Affiliate is, or has been, party to any “multi-employer plan,” as that term is defined in Section 3(37) of ERISA.

(f) True and correct copies of the most recent annual report on Form 5500 and any attached schedules for each Parent Benefit Plan (if any such report was required by applicable Law) and a true and correct copy of the most recent determination letter issued by the Internal Revenue Service for each Parent Pension Plan have been provided to Parent.

(g) With respect to each Parent Benefit Plan, there are no actions, suits or claims (other than routine claims for benefits in the ordinary course) pending or, to Parent’s Knowledge, threatened against any Parent Benefit Plan, Parent, any Parent ERISA Affiliate or any trustee or agent of any Parent Benefit Plan.

(h) With respect to each Parent Benefit Plan to which Parent or any Parent ERISA Affiliate is a party which constitutes a group health plan subject to Section 4980B of the Code, each such Parent Benefit Plan complies, and in each case has complied, in all material respects with all applicable requirements of Section 4980B of the Code.

(i) Full payment has been made of all amounts which Parent or any Parent ERISA Affiliate was required to have paid as a contribution to any Parent Benefit Plan as of the last day of the most recent fiscal year of each of the Benefit Plans ended prior to the date of this Agreement, and none of Parent Benefit Plans has incurred any “accumulated funding deficiency” (as defined in Section 302 of ERISA and Section 412 of the Code), whether or not waived, as of the last day of the most recent fiscal year of each such Parent Benefit Plan ended prior to the date of this Agreement.

(j) Each Parent Benefit Plan is, and its administration is and has been during the six-year period preceding the date of this Agreement, in all material respects in compliance with, and none Parent or any Parent ERISA Affiliate has received any claim or notice that any such Parent Benefit Plan is not in material compliance with, all applicable Laws and Orders and

prohibited transaction exemptions, including to the extent applicable, the requirements of ERISA.

(k) Neither Parent nor any Parent ERISA Affiliate are in default in any material respect in performing any of its contractual obligations under any of Parent Benefit Plans or any related trust agreement or insurance contract.

(l) There are no material outstanding Liabilities of any Parent Benefit Plan other than Liabilities for benefits to be paid to participants in any Parent Benefit Plan and their beneficiaries in accordance with the terms of such Parent Benefit Plan.

(m) Subject to ERISA and the Code, each Parent Benefit Plan may be amended, modified, terminated or otherwise discontinued by Parent or a Parent ERISA Affiliate at any time without liability.

(n) No Parent Benefit Plan other than a Parent Pension Plan, retiree medical plan or severance plan provides benefits to any individual after termination of employment.

(o) The consummation of the Merger will not (either alone or in conjunction with any other event) (i) entitle any current or former director, employee, contractor or consultant of Parent to severance pay, unemployment compensation or any other payment, (ii) accelerate the time of payment or vesting, or increase the amount of compensation due to any such director, employee, contractor or consultant, or result in the payment of any other benefits to any Person or the forgiveness of any Indebtedness of any Person, (iii) result in any prohibited transaction described in Section 406 of ERISA or Section 4975 of the Code for which an exemption is not available, or (iv) result in the payment or series of payments by Parent or any of its Affiliates to any person of an “excess parachute payment” within the meaning of Section 280G of the Code.

(p) With respect to each Parent Benefit Plan that is funded wholly or partially through an insurance policy, all premiums required to have been paid to date under the insurance policy have been paid, all premiums required to be paid under the insurance policy through the Closing will have been paid on or before the Closing and, as of the Closing, there will be no liability of Parent or any Parent ERISA Affiliate under any insurance policy or ancillary agreement with respect to such insurance policy in the nature of a retroactive rate adjustment, loss sharing arrangement or other actual or contingent liability arising wholly or partially out of events occurring prior to the Closing.

(q) Each Parent Benefit Plan that constitutes a “welfare benefit plan,” within the meaning of Section 3(1) of ERISA, and for which contributions are claimed by Parent or any Parent ERISA Affiliate as deductions under any provision of the Code, is in compliance in all material respects with all applicable requirements pertaining to such deduction. With respect to any welfare benefit fund (within the meaning of Section 419 of the Code) related to a welfare benefit plan, there is no disqualified benefit (within the meaning of Section 4976(b) of the Code) that would result in the imposition of a tax under Section 4976(a) of the Code. All welfare benefit funds intended to be exempt from tax under Section 501(a) of the Code have been

determined by the Internal Revenue Service to be so exempt and no event or condition exists which would adversely affect any such determination.

(r) Parent Disclosure Schedule sets forth all Parent Benefit Plans covering employees of Parent outside of the United States (the “Parent Foreign Plans”). The Foreign Plans have been operated in accordance, and are in compliance, in all material respects with their constituent documents and all applicable Laws. There are no material unfunded Liabilities under or in respect of the Foreign Plans, and all contributions or other payments required to be made to or in respect of the Foreign Plans prior to the Closing Date have been made or will be made prior to the Closing Date.

5.18 Labor and Employment Matters.

(a) Parent is not a party or subject to any labor union or collective bargaining Contract. There have not been since January 1, 2002 and there are not pending or threatened any labor disputes, work stoppages, requests for representation, pickets, work slow-downs due to labor disagreements or any actions or arbitrations which involve the labor or employment relations of Parent. There is no unfair labor practice, charge or complaint pending, unresolved or, to Parent’s Knowledge, threatened before the National Labor Relations Board. No event has occurred or circumstance exist that may provide the basis of any work stoppage or other labor dispute.

(b) Parent has complied in all material respects with each, and is not in violation in any material respect of any, Law relating to anti-discrimination and equal employment opportunities and there are, and have been, no material violations of any other Law respecting the hiring, hours, wages, occupational safety and health, employment, promotion, termination or benefits of any employee or other Person. Parent has filed all reports, information and notices required under any Law respecting the hiring, hours, wages, occupational safety and health, employment, promotion, termination or benefits of any employee or other Person, and will timely file prior to Closing all such reports, information and notices required by any Law to be given prior to Closing.

(c) Parent has paid or properly accrued in the ordinary course of business all wages and compensation due to employees, including all vacations or vacation pay, holidays or holiday pay, sick days or sick pay, and bonuses.

(d) Parent is not a party to any Contract which restricts Parent from relocating, closing or terminating any of its operations or facilities or any portion thereof. Parent has not, since January 1, 2002 effectuated a “plant closing” (as defined by the WARN Act) or (ii) a “mass lay-off” (as defined in the WARN Act), in either case affecting any site of employment or facility of Parent, except in accordance with the WARN Act. The consummation of the Merger will not create liability for any act by Parent on or prior to the Closing Date under the WARN Act or any other Law respecting reductions in force or the impact on employees on plant closings or sales of businesses.

5.19 Environmental.

(a) Parent has secured, and is in compliance in all material respects with, all Environmental Permits required in connection with its operations and the Real Property. Each Environmental Permit, together with the name of the Governmental Entity issuing such Environmental Permit, is set forth in Parent Disclosure Schedule. All such Environmental Permits are valid and in full force and effect and none of such Environmental Permits will be terminated or impaired or become terminable as a result of the Merger. Parent has been, and is currently, in compliance in all material respects with all Environmental Laws. Parent has not received notice alleging that Parent is not in such compliance with Environmental Laws.

(b) There are no past, pending or, to Parent’s Knowledge, threatened Environmental Actions against or affecting Parent, and Parent is not aware of any facts or circumstances which could be expected to form the basis for any Environmental Action against Parent.

(c) Parent has not entered into or agreed to any Order, and Parent is not subject to any Order, relating to compliance with any Environmental Law or to investigation or cleanup of a Hazardous Substance under any Environmental Law.

(d) No Lien has been attached to, or asserted against, the assets, property or rights of Parent pursuant to any Environmental Law, and, to Parent’s Knowledge, no such Lien has been threatened. There are no facts, circumstances or other conditions that could be expected to give rise to any Liens on or affecting any Real Property.

(e) There has been no treatment, storage, disposal or Release of any Hazardous Substance at, from, into, on or under any Real Property or any other property currently or formerly owned, operated or leased by Parent. No Hazardous Substances are present in, on, about or migrating to or from any Real Property that could be expected to give rise to an Environmental Action against Parent.

(f) Parent has not received a CERCLA 104(e) information request nor has Parent been named a potentially responsible party for any National Priorities List site under CERCLA or any site under analogous state Law. Parent has not received an analogous notice or request from any non-U.S. Governmental Entity.

(g) There are no aboveground tanks or underground storage tanks on, under or about the Real Property. Any aboveground or underground tanks previously situated on the Real Property or any other property currently or formerly owned, operated or leased by Parent have been removed in accordance with all Environmental Laws and no residual contamination, if any, remains at such sites in excess of applicable standards.

(h) There are PCBs leaking from any article, container or equipment on, under or about the Real Property and there are no such articles, containers or equipment containing PCBs. There is no asbestos containing material or lead based paint containing materials in at, on, under or within the Real Property.

(i) Parent has not transported or arranged for the treatment, storage, handling, disposal, or transportation of any Hazardous Material to any off-site location which is an Environmental Clean-up Site.

(j) None of the Real Property is an Environmental Clean-up Site.

(k) Parent provided to Company true and complete copies of, or access to, all written environmental assessment materials and reports that have been prepared by or on behalf of Parent.

5.20 Interim Operations of Merger Sub. Merger Sub was formed solely for the purpose of engaging in the transactions contemplated by this Agreement, has engaged in no other business activities and has conducted its operations only as contemplated by this Agreement.

5.21 Related Party Transactions. There are no Contracts of any kind, written or oral, entered into by Parent with, or for the benefit of, any officer, director or stockholder of Parent or, to the Knowledge of Parent, any Affiliate of any of them, except in each case, for (a) employment agreements, indemnification agreements, fringe benefits and other compensation paid to directors, officers and employees consistent with previously established policies (including normal merit increases in such compensation in the ordinary course of business) and copies of which have been provided to Parent and are listed on Parent Disclosure Schedule, (b) reimbursements of ordinary and necessary expenses incurred in connection with their employment or service, and (c) amounts paid pursuant to Parent Benefit Plans of which copies have been provided to Company. To the Knowledge of Parent, none of such Persons has any material direct or indirect ownership interest in any firm or corporation with which Parent has a business relationship, or with any firm or corporation that competes with Parent (other than ownership of securities in a publicly traded company representing less than one percent of the outstanding stock of such company). No officer or director of Parent or member of his or her immediate family or greater than 5% stockholder of Parent or, to the Knowledge of Parent, any Affiliate of any of them or any employee of Parent is directly or indirectly interested in any Parent Material Contract.

5.22 Insurance. All insurance policies, binders of insurance and fidelity bonds which cover Parent and its business, properties, assets, directors or employees (the “Parent Policies”) are issued by an insurer that is financially sound and reputable, are in full force and effect and are enforceable in accordance with their terms. Such Parent Policies provide adequate insurance coverage for Parent and its businesses, properties, assets and employees, and are sufficient in all material respects for compliance with all Laws and Contracts to which Parent is a party or by which it is bound. There are no material pending claims under any of such Parent Policies as to which coverage has been questioned, denied or disputed by the insurer or in respect of which the insurer has reserved its rights.

5.23 Brokers or Finders. Parent shall indemnify and hold harmless Company and the officers and directors of Company from any obligations or liabilities to any person or entity engaged by or to whom the Parent is liable for brokerage and/or finders fees for services rendered in connection with the Merger contemplated by this Agreement.

5.24 No Illegal Payments. Neither Parent nor, to the Knowledge of Parent, any Affiliate, officer, agent or employee of Parent, directly or indirectly, has, since inception, on behalf of or with respect to Parent, (a) made any unlawful domestic or foreign political contributions, (b) made any payment or provided services which were not legal to make or provide or which Parent or any Affiliate thereof or any such officer, employee or other Person should reasonably have known were not legal for the payee or the recipient of such services to receive, (c) received any payment or any services which were not legal for the payer or the provider of such services to make or provide, (d) had any material transactions or payments which are not recorded in its accounting books and records or (e) had any off-book bank or cash accounts or “slush funds.”

5.25 Information Supplied. None of the information supplied or to be supplied by or on behalf of Parent for inclusion or incorporation by reference in (i) the Form S-4 Registration Statement will, when filed or at any time it is amended or supplemented or at the time the Form S-4 Registration Statement becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading or (ii) the proxy statement (the “Proxy Statement”) to be used by Parent in connection with the solicitation of votes in favor of Parent Authorized Stock Increase and Parent Authorized Name Change will, at the date it is first mailed to the stockholders of Parent or at the time of Parent Stockholders’ Meeting, contain any untrue statement of a material fact or omit to state any 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. The Proxy Statement and the Form S-4 Registration Statement will comply as to form in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations thereunder, except that no representation or warranty is made by Parent with respect to information or statements with respect to Company or any of its Subsidiaries made or incorporated by reference therein supplied by or on behalf of Company for inclusion or incorporation by reference in the Proxy Statement or the Form S-4 Registration Statement.

5.26 Antitakeover Statutes. No anti-takeover or similar Law binding on Parent applies or purports to apply to the Merger, this Agreement, Company Lock-Up and Voting Agreements and the transactions contemplated hereby. No other “control share acquisition,” “fair price,” “moratorium” or other anti-takeover Laws apply to this Agreement or any of the transactions contemplated hereby.

5.27 Compliance with Securities Laws. The offering and issuance by Parent of shares of Parent Common Stock, Parent stock options or warrants, Parent warrants and the issuance of any shares upon exercise of Parent stock options or warrants, were made and completed in substantial compliance with all applicable state, federal and foreign securities Laws.

5.28 Inclusion of Subsidiaries. All references in Sections 5.11, 5.18, 5.19, 5.21, 5.22, 5.23, 5.24, 5.25, 5.26 and 5.27 to Parent include any and all of its Subsidiaries.

ARTICLE VI

COVENANTS RELATING TO CONDUCT OF BUSINESS

This Article VI shall not become effective until this Agreement is no longer subject to termination as provided for in Section 9.1(a)(i). However, notwithstanding the preceding sentence, Parent shall notify Company and Company shall notify Parent within two (2) Business Days after either one of them permits, allows, or otherwise causes to occur any event prohibited by this Article VI or with respect to which any obligation which would otherwise be imposed upon either one of them by this Article VI shall not have been fulfilled or is not being fulfilled. In the event that Parent decides to engage in a spin off of assets to its shareholders as a dividend, Parent shall inform the Company of the relevant terms and conditions of the spin off at least two (2) Business Days prior to the consummation of the spin off.

6.1 Conduct of Business by Company.

(a) During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Effective Time, Company shall, and it shall cause each of its Subsidiaries to:

(i) carry on its business in the usual, regular and ordinary course in a manner consistent with past practice;

(ii) use its reasonable best efforts consistent with past practices and policies to preserve intact its present business organization, keep available the services of its present employees and preserve its relationships with customers, suppliers, distributors, licensors, licensees, and others having business dealings with it; and

(iii) use its reasonable best efforts to conduct its business in such a manner that on the Closing Date the representations and warranties of Company contained in this Agreement shall be true and correct, as though such representations and warranties were made on and as of such date, and Company shall use its reasonable best efforts to cause all of the conditions to the obligations of Parent and Merger Sub under this Agreement to be satisfied as soon as practicable following the date hereof.

(b) During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Effective Time, except as expressly provided in this Agreement, Company shall not, and it shall not permit any of its Subsidiaries to, without the prior written consent of Parent:

(i) adopt or propose any amendment to the Charter Documents of Company or any of its Subsidiaries;

(ii) declare, set aside or pay any dividend or other distribution (whether in cash, stock or other property) with respect to any securities;

(iii) issue or authorize any stock dividends or engage in any subdivision, reclassification, recapitalization, split, combination or exchange of shares or any

similar event with respect to Company Common Stock or (B) make any change in any issued and outstanding securities, or redeem, purchase or otherwise acquire any securities other than the repurchase at cost from employees of shares of Company Common Stock in connection with the termination of their employment pursuant to Company’s standard form of option/restricted shares agreement or a cancellation of issued shares at no cost to Company;

(iv) (A) other than pursuant to a written agreement or Company Benefit Plan disclosed in Company Disclosure Schedule in the amount required thereunder and other than payment of bonuses and increases in salaries or wage rates or fringe benefits to non-officer employees, contractors or consultants in the ordinary course of business consistent with past practice, (1) modify the compensation or benefits payable or to become payable by Company or any of its Subsidiaries to any of its current or former directors, officers, employees, contractors or consultants, or (2) modify any bonus, severance, termination, pension, insurance or other employee benefit plan, payment or arrangement made to, for or with any current or former directors, employees, contractors or consultants of Company or any of its Subsidiaries, or (B) enter into any employment (other than offer letters and letter agreements entered into in the ordinary course of business consistent with past practice with employees who are terminable “at-will”), severance or termination agreement;

(v) establish, adopt, enter into, amend or terminate any Company Benefit Plan or any collective bargaining, thrift, compensation or other plan, agreement, trust, fund, policy or arrangement for the benefit of any current or former directors, employees, contractors or consultants of Company or any of its Subsidiaries;

(vi) other than (A) sales of inventory, (B) the grant of Company Out-Bound Licenses on a non-exclusive basis and (C) other dispositions of property and assets that are not material, individually or in the aggregate, to Company and its Subsidiaries, taken as a whole, in each case in the ordinary course of business consistent with past practice, sell, lease, transfer or assign any property or assets of Company or any of its Subsidiaries;

(vii) other than borrowings in the ordinary course of business consistent with past practice pursuant to credit facilities existing on the date of this Agreement or the financing of ordinary course trade payables consistent with past practice, (A) assume, incur or guarantee any Indebtedness, other than endorsements for collection in the ordinary course of business or (B) modify the terms of any existing Indebtedness in any material respect;

(viii) other than Permitted Liens and Liens granted pursuant to credit facilities existing on the date of this Agreement in connection with borrowings permitted under subparagraph (vii), pledge or permit to become subject to Liens any properties or assets of Company or any of its Subsidiaries;

(ix) other than travel loans or advances in the ordinary course of business consistent with past practice, make any loans, advances or capital contributions to, or investments in, any other Person (other than its Subsidiaries);

(x) not cancel any debts or waive any claims or rights of substantial value;

(xi) other than in the ordinary course of business consistent with past practice, (A) amend, modify or terminate, or waive, release or assign any rights under any Company Material Contract, (B) enter into any Contract which, if entered into prior to the date hereof, would have been required to be set forth in Schedule 4.16 of the Company Disclosure Schedule;

(xii) acquire, or agree to acquire, from any Person any assets, operations, business or securities or engage in, or agree to engage in, any merger, consolidation or other business combination with any Person, except in connection with (A) capital expenditures set forth in Schedule 6.1(b)(xii) of Company Disclosure Schedule permitted hereunder or (B) acquisitions of inventory and other tangible assets in the ordinary course of business consistent with past practice;

(xiii) amend any Company Stock Option, Company Warrant or Other Company Purchase Right or authorize cash payments in exchange for any of the foregoing;

(xiv) make any filings or registrations, with any Governmental Entity, except routine filings and registrations made in the ordinary course of business;

(xv) take any actions outside the ordinary course of business;

(xvi) other than as required by GAAP (as advised by its regular independent accounts), make any changes in its accounting methods, principles or practices;

(xvii) make any Tax election, change its method of Tax accounting or settle any claim relating to Taxes;

(xviii) take any action or omit to do any act within its reasonable control which action or omission which is reasonably likely to result in any of the conditions to the Merger not being satisfied, except as may be required by applicable Law; or

(xix) agree, whether in writing or otherwise, to do any of the foregoing.

6.2 Conduct of Business by Parent.

(a) During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Effective Time, Parent shall, and it shall cause each of its Subsidiaries to except as set forth in the Parent Disclosure Schedule:

(i) carry on its business in the usual, regular and ordinary course in a manner consistent with past practice;

(iii) use its reasonable best efforts to conduct its business in such a manner that on the Closing Date the representations and warranties of Parent contained in this Agreement shall be true and correct, as though such representations and warranties were made on and as of such date, and Parent shall use its reasonable best efforts to cause all of the conditions to the obligations of Parent and Merger Sub under this Agreement to be satisfied as soon as practicable following the date hereof.

(b) During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Effective Time, except as expressly provided in this Agreement and except as set forth in the Parent Disclosure Schedule, Parent shall not, and it shall not permit any of its Subsidiaries to, without the prior written consent of Company:

(i) adopt or propose any amendment to the Charter Documents of Parent or any of its Subsidiaries;

(ii) declare, set aside or pay any dividend or other distribution (whether in cash, stock or other property) with respect to any securities;

(iii) (A) issue any stock dividends except for any spinoff or engage in any subdivision, reclassification, recapitalization, split, combination or exchange of shares or any similar event with respect to Parent Common Stock between the Closing Date and the Effective Time or (B) make any change in any issued and outstanding securities, or redeem, purchase or otherwise acquire any securities other than the repurchase at cost from employees of shares of Parent Common Stock in connection with the termination of their employment pursuant to Parent’s standard form of option/restricted shares agreement or a cancellation of issued shares at no cost to Parent;

(iv) (A) other than pursuant to a written agreement in the amount required thereunder and other than payment of bonuses and increases in salaries or wage rates or fringe benefits to non-officer employees, contractors or consultants in the ordinary course of business consistent with past practice, (1) modify the compensation or benefits payable or to become payable by Parent or any of its Subsidiaries to any of its current or former directors, officers, employees, contractors or consultants, or (2) modify any bonus, severance, termination, pension, insurance or other employee benefit plan, payment or arrangement made to, for or with any current or former directors, employees, contractors or consultants of Parent or any of its Subsidiaries, or (B) enter into any employment (other than offer letters and letter agreements entered into in the ordinary course of business consistent with past practice with employees who are terminable “at-will”), severance or termination agreement;

(v) establish, adopt, enter into, amend or terminate any employee benefit plan or any collective bargaining, thrift, compensation or other plan, agreement, trust, fund, policy or arrangement for the benefit of any current or former directors, employees, contractors or consultants of Parent or any of its Subsidiaries;

(vi) other than (A) sales of inventory, (B) the grant of licenses, sublicenses and other Contracts pursuant to which Parent or any of its Subsidiaries authorizes a

third party to use or practice any rights under, or grant sublicenses with respect to, intellectual property owned by Parent on a non-exclusive basis, (C) other dispositions of property and assets that are not material, individually or in the aggregate, to Parent and its Subsidiaries, taken as a whole, in each case in the ordinary course of business consistent with past practice, sell, lease, transfer or assign any property or assets of Parent or any of its Subsidiaries;

(vii) other than borrowings in the ordinary course of business consistent with past practice pursuant to credit facilities existing on the date of this Agreement (including the convertible debenture under negotiation) or the financing of ordinary course trade payables consistent with past practice, (A) assume, incur or guarantee any Indebtedness, other than endorsements for collection in the ordinary course of business or (B) modify the terms of any existing Indebtedness in any material respect;

(x) not cancel any debts or waive any claims or rights of substantial value;

(xi) other than in the ordinary course of business consistent with past practice, amend, modify or terminate or otherwise waive, release or assign any rights under, any material Contract;

(xii) acquire, or agree to acquire, from any Person any assets, operations, business or securities or engage in, or agree to engage in, any merger, consolidation or other business combination with any Person, except in connection with (A) capital expenditures set forth in Schedule 6.2(b)(xii) of Parent Disclosure Schedule permitted hereunder or (B) acquisitions of inventory and other tangible assets in the ordinary course of business consistent with past practice;

(xiii) amend any stock option, warrant or other purchase right to acquire shares of Parent Common Stock or authorize cash payments in exchange for any of the foregoing;

(xiv) make any filings or registrations, with any Governmental Entity, except routine filings and registrations made in the ordinary course of business;

(xv) take any actions outside the ordinary course of business;

(xvi) other than as required by GAAP (as advised by its regular independent accounts), make any changes in its accounting methods, principles or practices;

(xvii) make any Tax election, change its method of Tax accounting or settle any claim relating to Taxes;

(xix) agree, whether in writing or otherwise, to do any of the foregoing.

6.3 Exclusivity.

(a) Subject to Section 6.3(b), except with respect to this Agreement and the transactions contemplated hereby and except as set forth in the Company Disclosure Schedule and the Parent Disclosure Schedule, each of Company and Parent agrees that it will not, and it will use its reasonable best efforts to cause its Subsidiaries and its and their respective directors, officers, employees, Affiliates and other agents and representatives (including any investment banking, legal or accounting firm retained by it or any of them and any individual member or employee of the foregoing) (each, an “Agent”) not to: (i) initiate, solicit, encourage or seek, directly or indirectly, any inquiries relating to or the making or implementation of any Third Party Proposal; (ii) engage in any negotiations concerning, or provide any information or data to, or have any substantive discussions with, any Person relating to a Third Party Proposal; (iii) otherwise cooperate in or facilitate any effort or attempt to make, implement or accept a Third Party Proposal; (iv) enter into Contract with any Person relating to a Third Party Proposal or (v) release any third party from, or waive any provision of, any confidentiality or standstill agreement to which it is a party. Each of Company and Parent will immediately cease, and will cause their respective Subsidiaries and Agents immediately to cease, any and all existing activities, discussions or negotiations with any third parties conducted heretofore with respect to any Third Party Proposal. “Third Party Proposal” means any Contract, proposal or offer (including any proposal or offer to the stockholders of Company or Parent, as the case may be) with respect to a proposed or potential Acquisition Transaction. “Acquisition Transaction” means, with respect to Company or Parent, as the case may be, (A) any sale, lease or other disposition, direct or indirect (and however structured), of any business or assets of such party and/or any of its Subsidiaries (which business or assets represent 10% or more of the consolidated revenues, net income or assets of such party and its Subsidiaries, taken as a whole), (B) any tender offer (including a self-tender offer) or exchange offer that, if consummated, would result in a third party beneficially owning 10% or more of any class of securities of such party, (C) a merger, consolidation, share exchange, business combination, reorganization, joint venture, recapitalization, liquidation, dissolution or other similar transaction involving such party and/or any of its Subsidiaries (which Subsidiaries represent 10% or more of the consolidated revenues, net income or assets of such party and its Subsidiaries, taken as a whole), (D) the issuance, sale or other disposition, direct or indirect (and however structured), of securities (or securities or other rights convertible into, or exercisable or exchangeable for, such securities) representing 10% or more of the voting power or capital stock of such party and/or any of its Subsidiaries (which Subsidiaries represent 10% or more of the consolidated revenues, net income or assets of such party and its Subsidiaries, taken as a whole) or (E) any combination of the foregoing (other than the Merger).

(b) Notwithstanding anything to the contrary in Section 6.3(a), the Board of Directors of Parent or Company, may furnish information to, and enter into discussions or negotiations with, a Person who has made an unsolicited, written, bona fide Third Party Proposal if, and only if, the Board of Directors of Parent or Company, has (i) reasonably concluded that such Third Party Proposal constitutes a Superior Proposal, (ii) reasonably concluded, after receiving advice from its outside legal counsel, that, in light of such Superior Proposal, the furnishing of such information or entering into discussions is required to comply with its fiduciary obligations to its stockholders under applicable Law, (iii) provided written notice to Parent or Company, as applicable, of its intent to furnish information or enter into discussions or negotiations with such Person at least three (3) Business Days prior to taking any such action and (iv) obtained from such Person an executed confidentiality agreement on terms no less favorable to Parent or Company, as the case may be, than those contained in the Confidentiality Agreement. The Board of Directors of Parent or Company shall furnish to Company or Parent, as applicable, all information provided to the Person who has made the Superior Proposal to the extent that such information has not been previously provided to Parent or Company and shall keep Parent or Company promptly and reasonably informed as to the status of any discussions regarding such Superior Proposal. Notwithstanding the foregoing, no information may be furnished and no discussions may be entered into in the event that Parent or Company has taken any actions inconsistent with this Section 6.3. “Superior Proposal” means an unsolicited written bona fide Third Party Proposal pursuant to which a Person (or its stockholders) would own, if consummated, all or substantially all of the outstanding capital stock of Parent or Company (or of the surviving entity in a merger or the direct or indirect parent of the surviving entity in a merger) or all or substantially all the assets of Parent or Company and their Subsidiaries taken as a whole on terms that the Board of Directors of Parent or Company determines, in its good faith judgment, to be more favorable to Parent’s or Company’s stockholders from a financial point of view than the terms of the Merger and with any financing required to consummate the transaction contemplated by such Third Party Proposal committed or likely, in the good faith judgment of the Board of Directors of Parent or Company, to be obtained by such third party on a timely basis.

(c) Nothing in this Agreement shall prevent the Board of Directors of Parent or Company from withholding, withdrawing, amending, modifying or changing its recommendation in favor of Parent Stockholder Approval or Company Stockholder Approval, and, in the case of a tender or exchange offer made directly to Parent Stockholders or Company Stockholders, a recommendation that Parent Stockholders accept the tender or exchange offer (each, a “Change of Recommendation”), if all of the following conditions are satisfied:

(i) a Superior Proposal is made to Parent or Company and is not withdrawn;

(ii) Parent Stockholders’ Meeting has not occurred or Company has not received the majority written consent of Company Stockholders adopting the Merger Agreement;

(iii) Parent or Company shall have provided at least three (3) Business Days’ prior written notice (the “Notice Period”) to Company or Parent, as the case may be, stating (A) that it has received a Superior Proposal, (B) the terms and conditions of such Superior

Proposal and the identity the Person making such Superior Proposal and (C) that it intends to effect a Change of Recommendation and the manner in which it intends to so;

(iv) Neither Parent nor Company, within the Notice Period, shall have made an offer that the Board of Directors of Parent or Company by a majority vote determines in its good faith judgment to be at least as favorable to such party and its stockholders as such Superior Proposal (it being agreed that the Board of Directors of such party shall convene a meeting to consider any such offer by the other party promptly following the receipt thereof);

(v) the Board of Directors of Parent or Company concludes in good faith, after receiving the advice of its outside legal counsel, that, in light of such Superior Proposal, the failure of the Board of Directors of Parent or Company to effect a Change of Recommendation would result in a breach of its fiduciary obligations to its stockholders under applicable Law;

(vi) Parent or Company, as the case may be, shall not have breached any of the provisions set forth in this Section 6.3.

(d) Nothing contained in this Agreement shall prohibit Parent, Company or their respective Boards of Directors from taking and disclosing to their stockholders a position contemplated by Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act; provided that neither Parent nor Company shall take a position that effects, or otherwise make any public statement that constitutes, a Change of Recommendation unless specifically permitted pursuant to the terms of Section 6.3(c)

ARTICLE VII

ADDITIONAL AGREEMENTS

7.1 Proxy Statement; Registration Statement.

(a) As promptly as practicable after the execution of this Agreement, Parent with the assistance of Company shall prepare and Parent shall file with the SEC the Proxy Statement/Prospectus relating to the solicitation of proxies from Parent Stockholders to authorize (i) Parent Authorized Stock Increase so as to permit the issuance of Parent Common Stock pursuant to the Merger and (ii) Parent Authorized Name Change. Parent shall prepare and file with the SEC the Form S-4 Registration Statement in which the Proxy Statement shall be included as a prospectus (a) in connection with the registration under the Securities Act of (i) the shares of Parent Common Stock to be issued to Company Stockholders pursuant to the Merger, and (ii) the Parent Common Stock issuable upon exercise of the options, warrants and exchangeable securities to purchase Company Common Stock which become options, warrants and exchangeable securities to purchase Parent Company Stock by virtue of the Merger, and (b) in connection with the registration for resale, subject to the provisions of Company Lock-Up and Voting Agreements, of the shares of Parent Common Stock issued to the Principal Stockholders and any other “affiliates” (as referred to in Section 7.11) in the Merger. Each of Company and Parent shall use its reasonable best efforts to cause the Form S-4 Registration Statement to become effective as promptly as practicable and, prior to the effective date of the Form S-4

Registration Statement, Parent shall use its reasonable best efforts to take all or any action required under any applicable federal or state securities Laws in connection with the issuance of shares of Parent Common Stock pursuant to the Merger. In the event that Company does not elect to pay the legal costs described in paragraph 14 of the non-binding letter of intent referred to in Section 10.10, this Agreement shall be terminated forthwith which shall be deemed a termination under Article IX. Each of Company and Parent shall furnish all information concerning itself as the other may reasonably request in connection with such actions and the preparation of the Form S-4 Registration Statement and Proxy Statement.

(b) Each of Company and Parent shall give the other party and its counsel a reasonable opportunity to review and comment on any amendment or supplement to the Proxy Statement or Form S-4 Registration Statement prior to filing any amendment or supplement with the SEC, and reasonable and good faith consideration shall be given to any comments made by the other party and its counsel. Each of Company and Parent shall (i) promptly provide the other party and its counsel with any comments or other communications, whether written or oral, that it or its counsel may receive from time to time from the SEC or its staff with respect to the Proxy Statement and Form S-4 Registration Statement promptly after receipt of those comments or other communications and (ii) provide the other party with a reasonable opportunity to participate in the response to those comments and to provide comments on that response (to which reasonable and good faith consideration shall be given), including by participating in any discussions or meetings with the SEC. Neither Company nor Parent shall make any amendment or supplement to the Proxy Statement or the Form S-4 Registration Statement without the approval of the other party (such approval not to be unreasonably withheld or delayed). Each of Company and Parent will advise the other, promptly after it receives notice thereof, of the time at which the Form S-4 Registration Statement has become effective or any supplement or amendment has been filed, of the issuance of any stop order, of the suspension of the qualification of the shares of Parent Common Stock issuable pursuant to the Merger for offering or sale in any jurisdiction.

(c) The information supplied by Company and Parent, as applicable, for inclusion in the Form S-4 Registration Statement and the Proxy Statement shall not, (i) at the time the Form S-4 Registration Statement is declared effective, (ii) at the time the Proxy Statement (or any amendment thereof or supplement thereto) is first mailed to Company Stockholders and Parent Stockholders or (iii) at the time of Parent Stockholders’ Meeting, contain any untrue statement of a material fact or fail to state any 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 were made, not misleading. If, at any time prior to the Effective Time, any event or circumstance relating to Company and its Subsidiaries, in the case of Company, or to Parent and its Subsidiaries, in the case of Parent, or their respective officers or directors, should be discovered by Company or Parent that should be set forth in an amendment or a supplement to the Form S-4 Registration Statement or Proxy Statement so that any of such documents will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, Company or Parent, as applicable, shall promptly inform the other party. All documents that Parent is responsible for filing with the SEC in connection with the Merger or the other transactions contemplated by this Agreement will comply as to form

and substance in all material respects with the applicable requirements of the Securities Act and the Exchange Act.

(d) Each of Company and Parent shall use its reasonable best efforts to cause to be delivered to the other party two letters from their respective independent accountants, one dated approximately as of the date the Form S-4 Registration Statement is declared effective and one dated approximately as of the Closing Date, each addressed to the other party, in form and substance reasonably satisfactory to the other party and customary in scope and substance for comfort letters delivered by independent public accountants in connection with registration statements on Form S-4 under the Securities Act.

(e) Each of Company and Parent shall use its reasonable best efforts to cause to be delivered to the other party consents from their respective independent accountants, dated the date on which the Form S-4 Registration Statement is declared effective or a date not more than two (2) days prior to such date, in form reasonably satisfactory to the other party and customary in scope and substance for consents delivered by independent public accountants in connection with registration statements on Form S-4 under the Securities Act.

7.2 Other Filings and Disclosure Schedules.

(a) As promptly as practicable after the execution of this Agreement, Company shall assist Parent and its legal and accounting advisors in preparing, and shall furnish Parent with such business, financial or other information and documents as may be required to prepare any Securities Act filings to be made by Parent with the SEC prior to or following the Effective Time. Parent shall provide Company and its counsel with an opportunity to review and comment on the above-referenced documents within the time periods prescribed by the SEC prior to their submission.

(b) This subsection shall apply notwithstanding anything in this Agreement to the contrary. Within fifteen (15) Business Days of the date hereof, Parent and Company shall finalize their respective Disclosure Schedules and provide same to the other, which shall have five (5) Business Days to accept or reject such Disclosure Schedule. Unless either Parent or Company notifies the other within such five (5) Business Day period that it rejects the other’s Disclosure Schedule, both Parent Disclosure Schedule and Company Disclosure Schedule shall be deemed accepted and shall become part of this Agreement. If either Parent or Company notifies the other within such five (5) Business Day period that it rejects the other’s Disclosure Schedule, Parent and Company shall negotiate in good faith to attempt to agree on an acceptable Disclosure Schedule or amendment to this Agreement for the succeeding ten (10) Business Days. If no agreement is reached by the end of such ten (10) Business Day good faith negotiation period, this Agreement shall forthwith terminate.

7.3 Meeting of Stockholders.

(a) As promptly as practicable after the Form S-4 Registration Statement shall have become effective, Parent shall take all action necessary under the Nevada Revised Statutes and its Charter Documents to call, convene and hold a meeting of its stockholders to consider Parent Authorized Stock Increase and Parent Authorized Name Change. Parent will use

its reasonable best efforts to hold Parent Stockholders’ Meeting as soon as practicable after the date on which the Form S-4 Registration Statement becomes effective. Unless there has been a Change in Recommendation, Parent shall use its reasonable best efforts to solicit from its stockholders proxies in favor of the approval of Parent Authorized Stock Increase and Parent Authorized Name Change, and shall take all other action it deems advisable to secure the vote of its stockholders required by the Nevada Revised Statutes, to obtain such approvals.

(b) Except to the extent expressly permitted by Section 6.3(c), (i) the Board of Directors of Parent shall recommend that Parent Stockholders vote in favor of Parent Authorized Stock Increase and Parent Authorized Name Change, (ii) the Proxy Statement shall include a statement that the Board of Directors of Parent has recommended that Parent Stockholders vote in favor of Parent Authorized Stock Increase and Parent Authorized Name Change and (iii) neither the Board of Directors of Parent nor any committee thereof shall effect any Change of Recommendation; provided, however, that the foregoing shall not prohibit the Board of Directors of Parent from fulfilling its duty of candor or disclosure to its stockholders under applicable Law.

7.4 Access to Information. Subject to the terms of the mutual non-disclosure agreement by and between Company and Parent dated September 22, 2004 (the “Confidentiality Agreement”), each of Company and Parent shall, and shall cause its Subsidiaries to, afford to the other party’s officers, directors, employees, accountants, counsel and other agents (“Representatives”) reasonable access to its properties, assets and records during the period prior to the Effective Time to obtain all information concerning its business as such other party may reasonably request. Each of Company and Parent shall furnish to the other party all such documents and copies of documents and records and information with respect to itself and its Subsidiaries and copies of any working papers relating thereto as the other party may reasonably request. Nothing in this Section 7.4 shall require Company or Parent, as the case may be, to provide any access, or to disclose any information, if permitting such access or disclosing such information would (a) violate applicable Law, (b) violate any of its obligations with respect to confidentiality (provided that each party shall, upon the request of the other party, use its reasonable best efforts to obtain the required consent of any third party to such access or disclosure), or (c) result in the loss of attorney-client privilege (provided that each party shall use its reasonable best efforts to allow for such access or disclosure in a manner that does not result in a loss of attorney-client privilege). Each of Company and Parent also will consult with the other party regarding its business on a regular basis.

7.5 Consent of Company Stockholders.

(a) Concurrently with the execution of this Agreement, the Principal Stockholders shall deliver to Parent a Company Lock-up and Voting Agreement executed by each of the Principal Stockholders. As promptly as practicable after the Form S-4 Registration Statement shall have become effective, Company shall mail the Prospectus and the Consent Solicitation5 contained in such Registration Statement to Company Stockholders.

(b) Except to the extent expressly permitted by Section 6.3(c) or in connection with any termination of this Agreement permitted by its terms, neither the Board of Directors of Company nor any committee thereof shall affect any Change of Recommendation; provided,

however, that the foregoing shall not prohibit the Board of Directors of Company from fulfilling its duty of candor or disclosure to its stockholders under applicable Law.

7.6 Regulatory Approvals.

(a) Each of Company, Parent and Merger Sub shall promptly apply for, and take all reasonably necessary actions to obtain or make, as applicable, all Authorizations, Orders, declarations and filings with, and notices to, any Governmental Entity required to be obtained or made by it for the consummation of the transactions contemplated hereby. Each party shall cooperate with and promptly furnish information to the other parties necessary in connection with any requirements imposed upon such other parties in connection with the consummation of the Merger.

(b) Each of Company and Parent shall give the other reasonable prior notice of any communication with, and any proposed understanding or agreement with, any Governmental Entity regarding any Authorizations, Orders, declarations and filings with, and notices to, any Governmental Entity, and permit the other to review and discuss in advance, and consider in good faith the views of the other in connection with, any proposed communication, understanding or agreement with any Governmental Entity with respect to the Merger and the transactions contemplated by this Agreement. Notwithstanding the foregoing, neither Company nor Parent shall be required to nor any of their respective Affiliates shall have any obligation to contest, administratively or in court, any ruling, order or other action of any Governmental Entity or any other Person respecting the transactions contemplated by this Agreement.

7.7 Public Announcements. If there is an initial press release relating to this Agreement, it shall be a joint press release the text of which has been agreed to by each of Parent and Company. Thereafter, each of Parent and Company shall not issue any press release or otherwise make any public statements with respect to this Agreement, the Merger or any of the other transactions contemplated by this Agreement without the prior consent of the other parties (such consent not to be unreasonably withheld or delayed); provided that a party may, without such consent (but after prior consultation to the extent practicable in the circumstances), issue such press releases and make such public statements that it believes are required by applicable Law or the rules of Over-the-Counter Bulletin Board. Notwithstanding the foregoing, a party may make public statements in response to questions from the press, analysts and investors and make internal announcements to employees, so long as such statements and announcements are consistent with previous press releases or public statements made jointly by Company and Parent and do not violate the terms of the Confidentiality Agreement.

7.8 Indemnification.

(a) From and after the Effective Time, the Surviving Corporation shall, to the fullest extent permitted by applicable Law, indemnify, defend and hold harmless, and provide advancement of expenses to, each Person who is now, or has been at any time prior to the date hereof or who becomes prior to the Effective Time, an officer, director or employee of Company or any of its Subsidiaries (the “Indemnified Parties”) against all losses, claims, damages, costs, expenses, liabilities or judgments or amounts that are paid in settlement of or in connection with any claim or Action that is based in whole or in part on, or arises in whole or in part out of, the

fact that such Person is or was a director, officer or employee of Company or any of its Subsidiaries, and pertaining to any matter existing or occurring, or any acts or omissions occurring, at or prior to the Effective Time, whether asserted or claimed prior to, or at or after, the Effective Time (including matters, acts or omissions occurring in connection with the approval of this Agreement and the consummation of the transactions contemplated hereby) to the same extent such Persons are entitled to be indemnified or have the right to advancement of expenses as of the date of this Agreement by Company or any of its Subsidiaries pursuant to the Charter Documents and indemnification agreements of Company and its Subsidiaries, if any, in existence on the date hereof with any directors, officers and employees of Company and its Subsidiaries.

(b) This Section 7.8 is intended to be for the benefit of, and shall be enforceable by, the Indemnified Parties and their heirs and personal representatives and shall be binding on the Surviving Corporation and its successors and assigns.

(c) In the event the Surviving Corporation or any of its successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity in such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any Person, then, and in each case, proper provision shall be made so that the successors and assigns of the Surviving Corporation honor the indemnification obligations set forth in this Section 7.8.

7.9 Tax Free Reorganization. Each of Company and Parent shall use their reasonable best efforts, and shall cause their respective Subsidiaries to use their reasonable best efforts, to take or cause to be taken any action necessary for the Merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Code. Neither Company nor Parent shall (and following the Effective Time, Parent shall cause the Surviving Corporation not to) take any action that would cause the Merger to fail to qualify as a “reorganization” within the meaning of Section 368(a) of the Code. This Agreement is intended to constitute a “plan of reorganization” within the meaning of Section 1.368-2(g) of the income tax regulations promulgated under the Code.

7.10 Listing. Company shall use its best efforts to cause the Parent Common Stock, including all such shares as are issuable under Article II (including shares of Parent Common Stock issuable upon the exercise of options, warrants and exchangeable securities), to be authorized for listing on the NASDAQ Capital Market, upon official notice of issuance. Company shall prepare such listing application for submission to NASDAQ promptly after execution of this Agreement. Company shall diligently pursue such application, respond promptly to all inquires and requests for information from NASDAQ and generally take all such actions as are necessary to achieve a successful listing of the Parent Common Stock in timely fashion. Parent shall cooperate with Company in all respects requested by Company in its efforts to obtain approval of such listing. Company shall provide Parent with a copy of its listing application promptly upon filing and shall keep Parent informed of its discussions with NASDAQ and all actions taken with respect to its application.

7.11 Affiliates. Not less than thirty (30) days after the day hereof, Company shall deliver to Parent a letter identifying all Persons who, in the judgment of Company, may be

deemed at the time this Agreement is submitted for adoption by Company Stockholders, “affiliates” of Company for purposes of Rule 145 under the Securities Act, and such list shall be updated as necessary to reflect changes from the date thereof. Company shall use its reasonable best efforts to cause each Person identified on such list to deliver to Parent an Affiliate Agreement.

7.12 Consents. Each of Company and Parent shall, and shall cause each of their respective Subsidiaries to, use its reasonable best efforts to obtain all Company Consents and Parent Consents, as applicable

7.13 Notification of Certain Matters. Each of Company and Parent shall give prompt notice to the other party of any fact, event or circumstance known to it that (a) individually or taken together with all other facts, events and circumstances known to it, has had or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Company or Parent or a Material Adverse Effect on Company and its Subsidiaries or Parent and its Subsidiaries taken as a whole, (b) would cause or constitute a breach of any of its representations, warranties, covenants or agreements contained herein, (c) the failure of any condition precedent to its obligations, (d) any notice or other communication from any third party alleging that, other than Company Consents and Parent Consents, the consent of such third party is or may be required in connection with the Merger, (e) any notice or other communication from any Governmental Entity in connection with the Merger, or (f) any Actions commenced relating to it or any of its Subsidiaries that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 4.17 or 5.16, as applicable; provided, however, that (i) the delivery of any notice pursuant to this Section 7.13 shall not prevent or cure any misrepresentations, breach of warranty or breach of covenant, and (ii) disclosure by Company or Parent shall not be deemed to amend or supplement Company Disclosure Schedule or Parent Disclosure Schedule or constitute an exception to any representation or warranty.

7.14 Conveyance Taxes. Each of Company and Parent shall cooperate in the preparation, execution and filing of all returns, questionnaires, applications or other documents regarding any real property transfer or gains, sales, use, transfer, value added, stock transfer and stamp taxes, any transfer, recording, registration and other fees or any similar taxes which become payable in connection with the transactions contemplated by this Agreement that are required or permitted to be filed on or before the Effective Time.

7.15 Maintenance of Registration Statements. The parties hereby acknowledge that Parent currently maintains Parent 1999 Omnibus Long-Term Incentive Plan (as amended to date, the “LTIP”) pursuant to which stock options and other stock-based incentives are issuable to employees and consultants of Parent and that six million shares of Parent Common Stock issuable under Parent LTIP are presently and will be registered on a Form S-8 registration statement (the Form S-8 registration statement outstanding as of the Closing Date being the “S-8 Registration Statement”). Company agrees to cause Parent to maintain the S-8 Registration Statement in effect following the Effective Time until the date on which all outstanding options covered thereby have been exercised or expired or otherwise ceased to be exercisable, subject to the issuance by the SEC of any stop order suspending the effectiveness of the S-8 Registration Statement, in which case, Company hereby agrees to promptly notify the persons set forth in

Schedule 7.15 of Parent Disclosure Schedule. As set forth on Schedule 7.15 of the Parent’s Disclosure Schedule, as of the date of this Agreement, there are 1,460,000 shares of Parent Common Stock subject to stock options under the LTIP.

7.16 Termination Prior to Effective Time. Notwithstanding the receipt of Parent Stockholder Approval and Company Stockholder Approval or anything in this Agreement to the contrary, the Boards of Directors of Merger Sub and/or Company may terminate this Agreement prior to the Effective Time in accordance with Section 251(d) of DGCL.

7.17 Further Assurances. Upon the terms and subject to the conditions hereof, each of the parties hereto shall execute such documents and other instruments and take such further actions as may be reasonably required to carry out the provisions hereof and consummate the Merger and the transactions contemplated by this Agreement.

ARTICLE VIII

CONDITIONS TO MERGER

8.1 Conditions to Each Party’s Obligation to Effect the Merger. The obligations of Parent, Merger Sub and Company to consummate the Merger are subject to the satisfaction on or prior to the Closing Date of the following conditions:

(a) Parent Stockholder Approval shall have been obtained.

(b) Other than the filings provided for in Section 7.1(b) of Parent and Company Disclosure Schedule, all Authorizations and Orders of, declarations and filings with, and notices to any Governmental Entity required to permit the consummation of the Merger shall have been obtained or made and shall be in full force and effect.

(c) No temporary restraining order, preliminary or permanent injunction or other Order preventing the consummation of the Merger shall be in effect. No Law shall have been enacted or shall be deemed applicable to the Merger which makes the consummation of the Merger illegal.

(d) The Form S-4 Registration Statement shall have become effective under the Securities Act prior to the mailing of the Proxy Statement by Parent to its stockholders, and shall not be the subject of any stop order or proceedings seeking a stop order, Company shall have mailed the Proxy Statement to Company Stockholders and have obtained the written consent of the majority of Company Stockholders to this Agreement and the Merger.

(e) The shares of Parent Common Stock issuable to Company Stockholders as provided for in Article II shall have been authorized for listing on the NASDAQ Capital Market upon official notice of issuance.

(f) No Action shall be pending or threatened before any court or other Governmental Entity or before any other Person wherein an unfavorable Order would (i) prevent consummation of the Merger, (ii) affect adversely the right of Parent to control Company and the Subsidiaries of Company or (iii) restrain or prohibit Parent’s ownership or operation (or that of

its Subsidiaries or Affiliates) of all or any material portion of the business or assets of the Surviving Corporation and its Subsidiaries, taken as a whole, or compel Parent or any of its Subsidiaries or Affiliates to dispose of or hold separate all or any material portion of the business or assets of the Surviving Corporation and its Subsidiaries, taken as a whole, or of Parent and its Subsidiaries, taken as a whole. No such Order shall be in effect.

8.2 Conditions to Obligations of Parent and Merger Sub to Effect the Merger. The obligations of Parent and Merger Sub to effect the Merger are subject to the satisfaction (or waiver by Parent in its sole discretion) on or prior to the Closing Date of the following further conditions:

(a) Each of the representations and warranties of Company set forth in this Agreement that is qualified by a Material Adverse Effect on Company shall be true and correct at and as of the Closing Date as if made at and as of the Closing Date and each of such representations and warranties that is not so qualified shall be true and correct in all material respects at and as of the Closing Date as if made at and as of the Closing Date, except to the extent that such representations and warranties refer specifically to an earlier date, in which case such representations and warranties shall have been true and correct as of such earlier date.

(b) Each of the representations and warranties of the Principal Stockholders set forth in this Agreement that is qualified by a Material Adverse Effect on Company shall be true and correct at and as of the Closing Date as if made at and as of the Closing Date and each of such representations and warranties that is not so qualified shall be true and correct in all material respects at and as of the Closing Date as if made at and as of the Closing Date, except to the extent that such representations and warranties refer specifically to an earlier date, in which case such representations and warranties shall have been true and correct as of such earlier date.

(c) Company shall have performed, or complied with, in all material respects all obligations required to be performed or complied with by it under this Agreement at or prior to the Closing Date. Parent shall have received a certificate signed on behalf of Company by a Co-Chief Executive Officer of Company to such effect.

(d) There shall not have occurred any event, occurrence or change that has had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Company.

(e) Each of Parent and Merger Sub shall have received from a Co-Chief Executive Officer of Company, certificates dated as of the Closing Date, certifying the satisfaction of the conditions set forth in Section 8.2 of this Agreement.

8.3 Conditions to Obligation of Company to Effect the Merger. The obligation of Company to effect the Merger is subject to the satisfaction (or waiver by Company in its sole discretion) on or prior to the Closing Date of the following further conditions:

(a) Each of the representations and warranties of Parent set forth in this Agreement that is qualified by a Material Adverse Effect on Parent shall be true and correct at and as of the Closing Date as if made at and as of the Closing Date and each of such representations and warranties that is not so qualified shall be true and correct in all material

respects at and as of the Closing Date as if made at and as of the Closing Date, except to the extent that such representations and warranties refer specifically to an earlier date, in which case such representations and warranties shall have been true and correct as of such earlier date.

(b) Parent and Merger Sub shall have performed or complied with in all material respects all obligations required to be performed or complied with by them under this Agreement at or prior to the Closing Date. Company shall have received a certificate signed on behalf of Parent by the Chief Executive Officer of Parent to such effect.

(c) There shall not have occurred any event, occurrence or change that has had, or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Parent.

(d) Company shall have received from the Chief Executive Officer of Parent, a certificate dated as of the Closing Date, certifying the satisfaction of the conditions set forth in Section 8.3 of this Agreement.

(e) Company shall have received releases from the current executive officers of Parent under any and all agreements they might have with the Parent or any of its Subsidiaries, except as contemplated by Section 1.4 and except for any and all rights of indemnification.

(f) The holders of no more than 100,000 Dissenting Shares shall be in a position to perfect their dissenters’ rights under DGCL as determined just prior to the Effective Time.

ARTICLE IX

TERMINATION

9.1 Termination.

(a) This Agreement may be terminated and the Merger abandoned at any time prior to the Effective Time (with any termination by Parent also being an effective termination by Merger Sub):

(i) by either Parent or Company, without giving any reason therefor; provided that Parent and Company may agree to terminate this provision at any time prior to the Effective Time;

(ii) by Parent or Company if:

(A) the Merger is not consummated on or before April 15, 2006 ; provided, however, that the right to terminate this Agreement under this clause (ii)(A) shall not be available to any party whose breach of a representation, warranty, covenant or agreement under this Agreement has been the cause of or resulted in the failure of the Closing to occur on or before such date;

(B) a Governmental Entity shall have issued an Order or taken any other action, in any case having the effect of permanently restraining, enjoining or otherwise prohibiting the Merger, which Order or other action is final and non-appealable;

(C) Parent Stockholder Approval shall not have been obtained at Parent Stockholders’ Meeting or any adjournment or postponement thereof.

(iii) by Parent if:

(A) any condition to the obligations of Parent hereunder becomes incapable of fulfillment other than as a result of a breach by Parent of any covenant or agreement contained in this Agreement, and such condition is not waived by Parent;

(B) there has been a breach by Company of any representation, warranty, covenant or agreement contained in this Agreement or if any representation or warranty of Company shall have become untrue, (i) in either case such that the conditions set forth in Sections 8.2(a) or 8.2(b) would not be satisfied and (ii) any such breach is not curable, or, if curable, is not cured within fifteen (15) days after written notice of such breach is given to Company by Parent;

(C) at any time prior to Parent Stockholder Approval, if (1) a Superior Proposal is made to Parent and is not withdrawn, (2) Parent shall have provided at least three (3) Business Days’ prior written notice to Company stating (a) that it has received a Superior Proposal, (b) the terms and conditions of such Superior Proposal and the identity of the Person making such Superior Proposal and (c) that it intends to terminate this Agreement, (3) Company shall not have, within such three (3) Business Day period, made an offer that the Board of Directors of Parent by a majority vote determines in its good faith judgment (based on the written advice of its financial advisor) to be at least as favorable to Parent and Parent Stockholders as such Superior Proposal (it being agreed that the Board of Directors of Parent shall convene a meeting to consider any such offer by Company promptly following the receipt thereof and that Parent shall not enter into any such binding agreement during such three Business Day period) and (4) the Board of Directors of Parent concludes in good faith, after consultation with its outside legal counsel, that, in light of such Superior Proposal, the failure of the Board of Directors to accept such Superior Proposal would result in a breach of its fiduciary obligations to Parent Stockholders under applicable Law; provided that Parent shall not have the right to terminate this Agreement pursuant to this Section 9.1(a)(iii)(C) if Parent has breached Section 6.3 in any material respect in connection with such Superior Proposal.

(iv) by Company if:

(A) any condition to the obligations of Company hereunder becomes incapable of fulfillment other than as a result of a breach by Company of any covenant or agreement contained in this Agreement, and such condition is not waived by Company;

(B) there has been a breach by Parent of any representation, warranty, covenant or agreement contained in this Agreement or if any representation or warranty of Parent shall have become untrue, (i) in either case such that the conditions set forth in Sections 8.3(a) or 8.3(b) would not be satisfied and (ii) any such breach is not curable, or, if

curable, is not cured within fifteen (15) days after written notice of such breach is given to Parent by Company; or

(D) at any time prior to Effective Time, if (1) a Superior Proposal is made to Company and is not withdrawn, (2) Company shall have provided at least three (3) Business Days’ prior written notice to Parent stating (a) that it has received a Superior Proposal, (b) the terms and conditions of such Superior Proposal and the identity of the Person making such Superior Proposal and (c) that it intends to terminate this Agreement, (3) Parent shall not have, within such three (3) Business Day period, made an offer that the Board of Directors of Company by a majority vote determines in its good faith judgment (based on the written advice of its financial advisor) to be at least as favorable to Company and Company Stockholders as such Superior Proposal (it being agreed that the Board of Directors of Company shall convene a meeting to consider any such offer by Parent promptly following the receipt thereof and that Company shall not enter into any such binding agreement during such three Business Day period) and (4) the Board of Directors of Company concludes in good faith, after consultation with its outside legal counsel, that, in light of such Superior Proposal, the failure of the Board of Directors to accept such Superior Proposal would result in a breach of its fiduciary obligations to Company Stockholders under applicable Law; provided that Company shall not have the right to terminate this Agreement pursuant to this Section 9.1(a)(iv)(D) if Company has breached Section 6.3 in any material respect in connection with such Superior Proposal.

(b) The party desiring to terminate this Agreement pursuant to Section 9.1(a) (ii), (iii) or (iv) shall give written notice of such termination to the other parties hereto.

9.2 Effect of Termination. In the event of termination of this Agreement as provided in Article IX, this Agreement shall immediately become void and there shall be no liability or obligation on the part of Company, Parent or Merger Sub or their respective officers, directors, stockholders or Affiliates; provided, however, that the provisions of Section 7.7 (Public Announcements) and Articles X and XI of this Agreement shall remain in full force and effect and survive any termination of this Agreement. In addition, Parent and Merger Sub shall promptly change the name of the merger sub to a name which does not include “Cryptometrics” or any name which can be confused with it.

9.3 Remedies. Any party terminating this Agreement pursuant to Section 9.1 shall not have the right to recover any damages sustained by such party as a result of any breach by the other party of any representation, warranty, covenant or agreement contained in this Agreement, except in the event of fraud.

ARTICLE X

MISCELLANEOUS

10.1 Notices. Any notice, request, demand, waiver, consent, approval or other communication which is required or permitted hereunder shall be in writing and shall be deemed

given: (a) on the date established by the sender as having been delivered personally; (b) on the date delivered by a private courier as established by the sender by evidence obtained from the courier; (c) on the date sent by facsimile, with confirmation of transmission, if sent during normal business hours of the recipient, if not, then on the next Business Day; or (d) on the fifth day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications, to be valid, must be addressed as follows:

If to Parent or Merger Sub, to:

JAG Media Holdings, Inc.
6865 SW 18th Street, Suite B13
Boca Raton, Florida 33433
Attn: Thomas J. Mazzarisi
Facsimile: (561) 892-0821

With a required copy to:

Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Attn: W. Preston Tollinger, Jr., Esq.
Facsimile: (212) 309-6001

If to Company, to:

Cryptometrics, Inc.
73 Main Street
Tuckahoe, NY 10707
Attn: Robert Barra
Facsimile: (914) 337-9754

With a required copy to:

Dorf, Karlen & Stolzar, LLP
1 North Broadway, Suite 800
White Plains, New York 10543
Attn: Michael Stolzar, Esq.
Facsimile: (914) 682-0387

or to such other address or to the attention of such Person or Persons as the recipient party has specified by prior written notice to the sending party (or in the case of counsel, to such other readily ascertainable business address as such counsel may hereafter maintain). If more than one method for sending notice as set forth above is used, the earliest notice date established as set forth above shall control.

10.2 Survival. The representations and warranties and covenants and agreements in this Agreement and in any certificate delivered pursuant hereto shall terminate at the Effective

Time, except that the covenants and agreements set forth in Articles I, II, VII and this Article X shall survive the Effective Time.

10.3 Amendments and Waivers.

(a) Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement, or in the case of a waiver, by the party against whom the waiver is to be effective; provided that, after approval of the matters presented in connection with the Merger by Company Stockholders, no amendment or waiver shall be made which by Law requires further approval by Company Stockholders without such further approval.

(b) No failure or delay by any party in exercising any right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

(c) To the maximum extent permitted by Law, (i) no waiver that may be given by a party shall be applicable except in the specific instance for which it was given and (ii) no notice to or demand on one party shall be deemed to be a waiver of any obligation of such party or the right of the party giving such notice or demand to take further action without notice or demand.

10.4 Fees and Expenses. Except as set forth in this Section 10.4, all fees and expenses incurred in connection with the Merger, this Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such fees or expenses, whether or not the Merger is consummated. Each of Company and Parent shall bear and pay one-half of the costs and expenses incurred by Parent, Merger Sub or Company (other than attorneys’ fees, accountants’ fees and related expenses) in connection with (i) the filing, printing and mailing of the Form S-4 Registration Statement (including financial statements and exhibits), the Proxy Statement and any preliminary materials related thereto (including SEC filing fees) and (ii) the filings of the notification and report forms under the HSR Act and Other Antitrust Laws (including filing fees).

10.5 Successors and Assigns. This Agreement may not be assigned by any party hereto without the prior written consent of the other parties; provided that Parent or Merger Sub may assign any of their respective rights and obligations to any direct or indirect Subsidiary of Parent. Subject to the foregoing, all of the terms and provisions of this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective executors, heirs, personal representatives, successors and assigns.

10.6 Governing Law. This Agreement and the Exhibits and Schedules hereto shall be governed by and interpreted and enforced in accordance with the Laws of the State of New York, without giving effect to any choice of Law or conflict of Laws rules or provisions (whether of the State of New York or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of New York.

10.7 Consent to Jurisdiction. Each party irrevocably submits to the exclusive jurisdiction of (a) New York County, New York, and (b) the United States District Court for the Southern District of New York, for the purposes of any Action arising out of this Agreement or any transaction contemplated hereby. Each party agrees to commence any such Action either in the United States District Court for the Southern District of New York or if such Action may not be brought in such court for jurisdictional reasons, in the Supreme Court sitting in New York County (including its Appellate Division). Each party further agrees that service of any process, summons, notice or document by U.S. registered mail to such party’s respective address set forth above shall be effective service of process for any Action in New York with respect to any matters to which it has submitted to jurisdiction in this Section 10.7. Each party irrevocably and unconditionally waives any objection to the laying of venue of any Action arising out of this Agreement or the transactions contemplated hereby in (i) the United States District Court for the Southern District of New York, or (ii) the Supreme Court sitting in New York County (including its Appellate Division), and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such Action brought in any such court has been brought in an inconvenient forum. EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF SUCH PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.

10.8 Counterparts. This Agreement may be executed in any number of counterparts, and any party hereto may execute any such counterpart, each of which when executed and delivered shall be deemed to be an original and all of which counterparts taken together shall constitute but one and the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other parties hereto. The parties agree that the delivery of this Agreement may be effected by means of an exchange of facsimile signatures with original copies to follow by mail or courier service.

10.9 Third Party Beneficiaries. No provision of this Agreement is intended to confer upon any Person other than the parties hereto any rights or remedies hereunder; except that (i) in the case of Section 7.8 hereof, the Indemnified Parties and their respective heirs, executors, administrators, legal representatives, successors and assigns, are intended third party beneficiaries of such section and shall have the right to enforce such section in their own names and (ii) in the case of Section 7.15, the holders of options under Parent LTIP and their respective heirs, executors, administrators, legal representatives, successors and assigns, are intended third party beneficiaries of such section and shall have the right to enforce such section in their own names.

10.10 Entire Agreement. This Agreement and the documents, instruments and other agreements specifically referred to herein or delivered pursuant hereto set forth the entire understanding of the parties hereto with respect to the Merger. All Exhibits and Schedules referred to herein are intended to be and hereby are specifically made a part of this Agreement. Any and all previous agreements and understandings between or among the parties regarding the subject matter hereof, whether written or oral, are superseded by this Agreement, other than the confidentiality provisions of the Confidentiality Agreement which shall continue in full force and

effect in accordance with their terms and other than the provisions of paragraph 14 of the non-binding letter of intent by and between Company and Parent, dated as of September 9, 2005.

10.11 Captions. All captions contained in this Agreement are for convenience of reference only, do not form a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement.

10.12 Severability. Any provision of this Agreement which is invalid or unenforceable in any jurisdiction shall be ineffective to the extent of such invalidity or unenforceability without invalidating or rendering unenforceable the remaining provisions hereof, and any such invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

10.13 Specific Performance. Parent and Company each agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed by them in accordance with the terms hereof and that each party shall be entitled to specific performance of the terms hereof, in addition to any other remedy at Law or equity.

ARTICLE XI

DEFINITIONS

11.1 Definitions. When used in this Agreement, the following terms shall have the meanings assigned to them in this Section 11.1, or in the applicable Section of this Agreement to which reference is made in this Section 11.1.

“Affiliate” means, with respect to any specified Person, any other Person directly or indirectly controlling, controlled by or under common control with such specified Person.

“Authorization” means any authorization, approval, consent, certificate, license, permit or franchise of or from any Governmental Entity or pursuant to any Law.

“Business Day” means a day other than a Saturday, Sunday or other day on which banks located in New York City are authorized or required by Law to close.

“Contract” means any agreement, contract, license, lease, commitment, arrangement or understanding, written or oral, including any sales order and purchase order.

“Governmental Entity” means any entity or body exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to United States federal, state, local, or municipal government, foreign, international, multinational or other government, including any department, commission, board, agency, bureau, subdivision, instrumentality, official or other regulatory, administrative or judicial authority thereof, and any non-governmental regulatory body to the extent that the rules and regulations or orders of such body have the force of Law.

“Indebtedness” means any of the following: (a) any indebtedness for borrowed money, (b) any obligations evidenced by bonds, debentures, notes or other similar instruments, (c) any

obligations to pay the deferred purchase price of property or services, except trade accounts payable and other current Liabilities arising in the ordinary course of business, (d) any obligations as lessee under capitalized leases, (e) any indebtedness created or arising under any conditional sale or other title retention agreement with respect to acquired property, (f) any obligations, contingent or otherwise, under acceptance credit, letters of credit or similar facilities and (g) any guaranty of any of the foregoing.

“Knowledge” of a party or any similar phrase means, with respect to any fact or matter, the actual knowledge of the directors and executive officers of such party and each of its Subsidiaries, together with such knowledge that such directors, executive officers and other employees could be expected to discover after due investigation concerning the existence of the fact or matter in question.

“Law” means any statute, law (including common law), constitution, treaty, ordinance, code, order, decree, judgment, rule, regulation and any other binding requirement or determination of any Governmental Entity.

“Material Adverse Effect” means any state of facts, development, event, circumstance, condition, occurrence or effect that, individually or taken collectively with all other events, circumstances or effects that have occurred prior to the date of determination of the occurrence of which, (a) is materially adverse to the condition (financial or otherwise), business, operations or results of operations of Company or Parent and their respective Subsidiaries taken as a whole, (b) impairs the ability of Company or Parent to perform its obligations hereunder or (c) delays the consummation of the Merger, other than in the case of clause (a), any such event, circumstance, condition, occurrence or effect arising out of any changes affecting the industry in which Company or Parent and their respective Subsidiaries operate or any changes in general economic conditions; provided that any such change or changes do not disproportionately affect in any material respect Company or Parent and their Subsidiaries, taken as a whole.

“Operative Agreements” means this Agreement, the Lock-Up and Voting Agreements and the Affiliate Agreements.

“Order” means any award, injunction, judgment, decree, order, ruling, subpoena or verdict or other decision entered, issued or rendered by any Governmental Entity.

“Person” means an individual, a corporation, a partnership, a limited liability company, a trust, an unincorporated association, a Governmental Entity or any agency, instrumentality or political subdivision of a Governmental Entity, or any other entity or body.

“Subsidiary” or “Subsidiaries” means, with respect to any party, any Person, of which (a) such party or any Subsidiary of such party is a general partner (excluding partnerships, the general partnership interests of which held by such party or any Subsidiary of such party do not have a majority of the voting interest in such partnership) or (b) at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the Board of Directors or others performing similar functions with respect to such Person is directly or indirectly owned or controlled by such party and/or by any one or more of its Subsidiaries.

“$” means United States dollars.

(b) The terms “hereof”, “herein” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement.

(c) When a reference is made in this Agreement to an Article, Section, paragraph, Exhibit or Schedule, such reference is to an Article, Section, paragraph, Exhibit or Schedule to this Agreement unless otherwise specified.

(d) The word “include”, “includes”, and “including” when used in this Agreement shall be deemed to be followed by the words “without limitation”, unless otherwise specified.

(e) A reference to any party to this Agreement or any other agreement or document shall include such party’s predecessors, successors and permitted assigns.

(f) Reference to any Law means such Law as amended, modified, codified, replaced or reenacted, and all rules and regulations promulgated thereunder.

(g) The parties have participated jointly in the negotiation and drafting of this Agreement. Any rule of construction or interpretation otherwise requiring this Agreement to be construed or interpreted against any party by virtue of the authorship of this Agreement shall not apply to the construction and interpretation hereof.

(h) All accounting terms used and not defined herein shall have the respective meanings given to them under GAAP.

EXHIBIT A

COMPANY VOTING AND LOCK-UP AGREEMENT

This Company Voting and Lock-Up Agreement (the “VOTING AGREEMENT”) is made as of December 27, 2005, by and among JAG Media Holdings, Inc., a Nevada corporation (“PARENT”), Robert Barra and Michael A. Vitale, each a stockholder (each individually, a “STOCKHOLDER” and together, the “STOCKHOLDERS”) of Cryptometrics, Inc., a Delaware corporation. (the “COMPANY”).

RECITALS:

WHEREAS, concurrently with the execution and delivery of this Voting Agreement, Parent, Cryptometrics Acquisition, Inc., a Delaware corporation and wholly owned subsidiary of Parent (“MERGER SUB”) and the Company are entering into an Agreement and Plan of Merger of even date herewith (the “MERGER AGREEMENT”), pursuant to which Merger Sub will be merged with and into the Company, and the Company shall be the surviving corporation following the merger (the “MERGER”);

WHEREAS, as of the date hereof, each Stockholder is a Beneficial Owner (as defined below) of Subject Shares (as defined below); and

WHEREAS, in order to induce Parent to enter into the Merger Agreement, the Stockholders have agreed to enter into this Voting Agreement.

NOW, THEREFORE, in consideration of the foregoing premises and of the covenants and agreements set forth herein and in the Merger Agreement, and intending to be legally bound hereby, the parties agree as follows:

1. Definitions.

(a) “BENEFICIALLY OWN” or “BENEFICIAL OWNER” with respect to any securities means having “beneficial ownership” as determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “EXCHANGE ACT”).

(b) “COMPANY CAPITAL STOCK” means shares of common stock, par value $0.001 per share, of the Company.

(c) “COMPANY OPTIONS AND OTHER RIGHTS” means options, warrants and other rights to acquire, directly or indirectly, shares of Company Capital Stock.

(d) “EXPIRATION DATE” means the earlier to occur of (i) the Effective Time (as defined in the Merger Agreement) or (ii) the date on which the Merger Agreement is terminated pursuant to its terms.

(e) “SUBJECT SHARES” means (i) all shares of Company Capital Stock Beneficially Owned by each Stockholder as of the date of this Voting Agreement and (ii) all additional shares of Company Capital Stock of which each Stockholder acquires Beneficial Ownership during the period from the date of this Voting Agreement through the Expiration Date.

2. Voting.

(a) Each Stockholder hereby agrees that, prior to the Expiration Date, at any meeting of the stockholders of the Company, however called, and in any written action by consent of stockholders of the Company, unless otherwise directed in writing by Parent, each Stockholder shall cause to be counted as present thereat for purposes of establishing a quorum and shall vote, or cause to be voted, any and all Subject Shares Beneficially Owned by each Stockholder as of the record date of such meeting or written consent:

(i) for the execution and delivery by the Company of the Merger Agreement and the adoption and approval of the Merger Agreement and the terms thereof, in favor of each of the other actions contemplated by the Merger Agreement and in favor of any action in furtherance of any of the foregoing;

(ii) against any action or agreement that would result in a breach of any representation, warranty, covenant or obligation of the Company in the Merger Agreement; and

(iii) against the following actions (other than the Merger and the transactions contemplated by the Merger Agreement): (A) any extraordinary corporate transaction, such as a merger, consolidation or other business combination involving the Company or any subsidiary of the Company; (B) any sale, lease, sublease, license, sublicense or transfer of a material portion of the rights or other assets of the Company or any subsidiary of the Company; (C) any reorganization, recapitalization, dissolution or liquidation of the Company or any subsidiary of the Company; (D) any change in the individuals who serve as members of the board of directors of the Company; (E) any amendment to the Company’s certificate of incorporation or bylaws; (F) any material change in the capitalization of the Company or the Company’s corporate structure; and (G) any other action which is intended, or could reasonably be expected, to impede, interfere with, delay, postpone, discourage or adversely affect the Merger or any of the other transactions contemplated by the Merger Agreement or this Agreement.

(b) No provision contained in this Agreement shall prohibit either Stockholder from voting in his capacity as a director of the Company in any manner whatsoever.

(c) Prior to the Expiration Date, neither Stockholder shall enter into any agreement or understanding with any Person requiring him to vote in his capacity as a stockholder or give instructions in any manner inconsistent with clause “(i),” clause “(ii)” or clause “(iii)” of this Section 2(a).

(d) Each Stockholder hereby waives and agrees not to exercise any applicable “appraisal rights” under the Delaware General Corporation Law with respect to the Subject Shares in connection with the Merger and the Merger Agreement.

3. Lock-up Agreement.

(a) In consideration of the issuance of common stock of Parent in exchange for the Subject Shares (the “PARENT SHARES”) to each of the Stockholders pursuant to the terms of the Merger Agreement, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and not withstanding any registration on the part of the Parent Shares under the Securities Act of 1933, as amended, each Stockholder agrees that, during the period beginning from the Effective Time (as defined in the Merger Agreement) and continuing for one (1) year thereafter (the “RELEASE DATE”), each Stockholder will not (a) offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of any Parent Shares, or (b) engage directly or indirectly in any transaction the likely result of which would involve a transaction prohibited by clause (a), except each case as permitted by Section 3(e) below.

(b) The foregoing restriction is expressly agreed to preclude each of the Stockholders from engaging in any hedging or other transaction which is designed to, or reasonably expected to lead to, or result in, a sale or disposition of the Parent Shares even if such shares would be disposed of by someone other than the Stockholders. Such prohibited hedging or other transactions would include without limitation any short sale or any purchase, sale or grant of any right (including without limitation any put or call option) with respect to any of the Parent Shares or with respect to any security that includes, relates to, or derives any significant part of its value from the Parent Shares.

(c) Each Stockholder further represents and agrees that the undersigned has not taken and will not take, directly or indirectly, any action which is designed to or which has constituted or which might reasonably be expected to cause or result in stabilization or manipulation of the price of any security of Parent to facilitate the sale or resale of the Parent Shares, or which has otherwise constituted or will constitute any prohibited bid for or purchase of the Parent Shares or any related securities.

(d) Each Stockholder acknowledges and agrees that, pending the Release Date, any additional Parent Shares acquired by such Stockholder upon exercise of Replacement Stock Options (as defined in the Merger Agreement) may not be sold or otherwise transferred notwithstanding that a registration statement on Form S-8 or Form S-4 may be effective with respect to the exercise of such options and the sale of Parent Shares obtained thereby.

(e) Notwithstanding the foregoing restrictions on transfer, each Stockholder may transfer the Parent Shares (i) in an amount not to exceed 35% of the total amount of Parent Shares received by such Stockholder pursuant to the Merger; provided however that such Parent Shares may not be transferred unless the Parent Shares are registered under the Securities Act of 1933, as amended, or (ii) as transfers by will or intestacy, or (iii) to any trust for the direct or indirect benefit of any of the Stockholder or the immediate family of such Stockholder; provided that any such transfer shall not involve a disposition for value. For purposes of this letter agreement, “immediate family” shall mean any relationship by blood, marriage or adoption, not more remote than first cousin.

(f) Each of the Stockholders now has, and, except as contemplated by the preceding paragraph (e), at all times prior to the Release Date will have, good and marketable title to the Parent Shares still owned by him, free and clear of all liens, encumbrances, and claims whatsoever. Each of the Stockholders agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against the transfer of the Parent Shares except in compliance with the foregoing restrictions in Sections 3(a) and (e) above. Each of the Stockholders understands that the restrictions with respect to the Parent Shares set forth herein are in addition to any other restrictions upon transfer that may arise pursuant to any other agreement to which either of the Stockholders is a party or under applicable securities laws.

4. Written Consent of Stockholders. Upon the U.S. Securities and Exchange Commission’s declaration of the effectiveness of the Registration Statement on Form S-4 filed by Parent in connection with the Merger, each Stockholder shall deliver to Parent a written consent in favor of the adoption of the Merger Agreement and the Merger.

5. Representations and Warranties of Stockholder. Each Stockholder represents and warrants to Parent as follows:

(a) As of the date of this Voting Agreement and at all times through the Expiration Date:

(i) Such Stockholder is the Beneficial Owner (free and clear of any encumbrances or restrictions) of the outstanding shares of Company Capital Stock set forth under the heading “Shares of Company Capital Stock Beneficially Owned”, on the signature page hereof;

(ii) Such Stockholder is the Beneficial Owner (free and clear of any encumbrances or restrictions) of the outstanding Company Options and Other Rights set forth under the heading “Company Options and Other Rights Beneficially Owned” on the signature page hereof; and

(iii) Such Stockholder does not directly or indirectly Beneficially Own any shares of Company Capital Stock or Company Options or Other Rights or other securities of the Company, other than the shares of Company Capital Stock and Company Options and Other Rights set forth on the signature page hereof.

(b) Each Stockholder has the legal capacity, power and authority to enter into and perform all of its obligations under this Voting Agreement. This Voting Agreement has been duly executed and delivered by such Stockholder, and upon its execution and delivery by Parent, will constitute a legal, valid and binding obligation of such Stockholder, enforceable against it in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to creditors rights generally, and the availability of injunctive relief and other equitable remedies.

(c) The execution, delivery and performance by each Stockholder of this Voting Agreement will not (i) conflict with, require a consent, waiver or approval under, or result in a breach of or default under, any of the terms of any contract, commitment or other obligation (written or oral) to which such Stockholder is a party or by which any of such Stockholder’s assets may be bound.

(d) No filing with, and no permit, authorization, consent or approval of, any state or federal public body or authority is necessary for the execution of this Voting Agreement by Stockholder and the consummation by Stockholder of the transactions contemplated hereby.

6. Covenants of Stockholder. Each Stockholder covenants and agrees for the benefit of Parent that, until the Expiration Date, such Stockholder will not:

(a) sell, transfer, pledge, hypothecate, encumber, assign, tender or otherwise dispose of, or enter into any contract, option or other arrangement or understanding with respect to the sale, transfer, pledge, hypothecation, encumbrance, assignment, tender or other disposition of, (i) any Subject Shares or any interest therein, or (ii) any Company Options and Other Rights or any interest therein; provided, however, that Stockholder may convert, exercise or exchange Company Options and Other Rights into or for shares of Company Capital Stock in which event such shares of Capital Stock shall become and be deemed Subject Shares subject to all the terms and conditions of this Voting Agreement;

(b) acquire any shares of the stock of Parent except pursuant to existing Company Options and Other Rights;

(c) grant any powers of attorney or proxies or consents in respect of any of the Subject Shares, deposit any of such Subject Shares into a voting trust, or enter into a voting agreement with respect to any of such Subject Shares; and

(d) take any other action with respect to the Subject Shares that would in any way restrict, limit or interfere with the performance of Stockholder’s obligations hereunder or the transactions contemplated hereby and the Merger Agreement.

7. Adjustments; Additional Shares. In the event (a) of any stock dividend, stock split, merger, recapitalization, reclassification, combination, exchange of shares or the like of the capital stock of the Company on, of or affecting the Subject Shares or (b) that Stockholder shall become the Beneficial Owner of any additional shares of Company Capital Stock or other securities entitling the holder thereof to vote or give consent with respect to the matters set forth in Section 2(a), then the terms of this Voting Agreement shall apply to the shares of Company Capital Stock or other instruments or documents held by Stockholder immediately following the effectiveness of the events described in clause (a) or Stockholder becoming the Beneficial Owner thereof as described in clause (b), as though, in either case, they were Subject Shares hereunder. The foregoing shall apply (mutatis mutandis) to the Parent Shares and Section 3 of this Voting Agreement.

8. Amendments and Waivers. Any provision of this Voting Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Voting Agreement, or in the case of a waiver, by the party against whom the waiver is to be effective. No failure or delay by any party in exercising any right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. To the maximum extent permitted by law, (a) no waiver that may be given by a party shall be applicable except in the specific instance for which it was given and (b) no notice to or demand on one party shall be deemed to be a waiver of any obligation of such party or the right of the party giving such notice or demand to take further action without notice or demand.

9. Assignment. This Voting Agreement may not be assigned by any party hereto without the prior written consent of the other parties. Subject to the foregoing, all of the terms and provisions of this Voting Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective executors, heirs, personal representatives, successors and assigns.

10. Entire Agreement. This Voting Agreement and the documents, instruments and other agreements specifically referred to herein or delivered pursuant hereto, set forth the entire understanding of the parties with respect to the subject matter hereof. Any and all previous agreements and understandings between or among the parties regarding the subject matter hereof, whether written or oral, are superseded by this Voting Agreement.

11. Notices. Any notice, request, demand, waiver, consent, approval or other communication which is required or permitted hereunder shall be in writing and shall be deemed given (a) on the date established by the sender as having been delivered personally; (b) on the date delivered by a private courier as established by the sender by evidence obtained from the courier; (c) on the date sent by facsimile, with confirmation of transmission, if sent during normal business hours of the recipient, if not, then on the next business day; or (d) on the fifth day after

the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications, to be valid, must be addressed as follows:

If to Parent, to:

JAG Media Holdings, Inc.
6865 SW 18th Street, Suite B13
Boca Raton, Florida 33433

Attn: Thomas J. Mazzarisi

Facsimile: 561-892-0821

With a required copy to:

Morgan, Lewis & Bockius LLP

101 Park Avenue

New York, New York 10178

Attn: W. Preston Tollinger, Jr., Esq.

Facsimile: 212-309-6001

If to:

Robert Barra or Michael A. Vitale c/o Cryptometrics, Inc.
73 Main Street Tuckahoe, NY 10707 Facsimile: (914) 337-9754

With a required copy to:

Dorf, Karlen & Stolzar, LLP
1 North Broadway, Suite 800
White Plains, New York 10543
Attn: Michael Stolzar, Esq.
Facsimile: 914-682-0387

or to such other address or to the attention of such person or persons as the recipient party has specified by prior written notice to the sending party (or in the case of counsel, to such other readily ascertainable business address as such counsel may hereafter maintain). If more than one method for sending notice as set forth above is used, the earliest notice date established as set forth above shall control.

12. Captions. All captions contained in this Voting Agreement are for convenience of reference only, do not form a part of this Voting Agreement and shall not affect in any way the meaning or interpretation of this Voting Agreement.

13. Severability; Enforcement. Any provision of this Voting Agreement which is invalid or unenforceable in any jurisdiction shall be ineffective to the extent of such invalidity or unenforceability without invalidating or rendering unenforceable the remaining provisions hereof, and any such invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

14. Specific Performance. Stockholder acknowledges that the agreements contained in this Voting Agreement are an integral part of the transactions contemplated by the Merger Agreement, and that, without these agreements, Parent would not enter into the Merger Agreement, and acknowledges that damages would be an inadequate remedy for any breach by Stockholder of the provisions of this Voting Agreement. Accordingly, Stockholder agrees that Stockholder’s obligations hereunder shall be specifically enforceable and Stockholder shall not take any action to impede the other from seeking to enforce such right of specific performance.

15. Consent to Jurisdiction. Each party irrevocably submits to the exclusive jurisdiction of (a) New York County, New York, and (b) the United States District Court for the Southern District of New York, for the purposes of any action, suit or proceeding arising out of this Voting Agreement or any transaction contemplated hereby. Each party agrees to commence any such action, suit or proceeding either in the United States District Court for the Southern District of New York or if such action, suit or proceeding may not be brought in such court for jurisdictional reasons, in the Supreme Court sitting in New York County (including its Appellate Division). Each party further agrees that service of any process, summons, notice or document by U.S. registered mail to such

party’s respective address set forth above shall be effective service of process for any action, suit or proceeding in New York with respect to any matters to which it has submitted to jurisdiction in this Section 15. Each party irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Voting Agreement or the transactions contemplated hereby in (i) the United States District Court for the Southern District of New York, or (ii) the Supreme Court sitting in New York County (including its Appellate Division), and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF SUCH PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.

16. Governing Law. This Voting Agreement shall be governed by and interpreted and enforced in accordance with the laws of the State of New York, without giving effect to any choice of law or conflict of laws rules or provisions (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York, except to the extent that the voting of the Subject Shares is subject to the corporate law of the State of Delaware.

IN WITNESS WHEREOF, this Voting Agreement has been duly executed by the parties hereto all as of the day and year first above written.

JAG MEDIA HOLDINGS, INC.


	By:

Name:


	Title:

Robert Barra

Number and class of shares of Capital Stock:

Number of Company Options and Other Rights:

Michael A. Vitale

Number and class of shares of Capital Stock:

Number of Company Options and Other Rights:

EXHIBIT B

CERTIFICATE OF MERGER
OF
CRYPTOMETRICS, INC.
AND
CRYPTOMETRICS ACQUISITION, INC.

Pursuant to Section 251 of the General Corporation Law of the State of Delaware (the “DGCL”), Cryptometrics, Inc., a Delaware corporation, DOES HEREBY CERTIFY that:

1. The name and jurisdiction of incorporation of each of the constituent corporations to the merger (collectively, the “Constituent Corporations”) are as follows:


Name		Jurisdiction of Incorporation

Cryptometrics, Inc.		Delaware
Cryptometrics Acquisition, Inc.		Delaware

2. An Agreement and Plan of Merger, dated as of December 27, 2005 [as amended to date] (the “Agreement and Plan of Merger”), by and among JAG Media Holdings, Inc., a Nevada corporation, and each of the Constituent Corporations, providing for the merger of Cryptometrics Acquisition, Inc., with and into Cryptometrics, Inc. has been approved, adopted, certified, executed and acknowledged by each of the Constituent Corporations in accordance with the requirements of Sections 228 and 251 of the DGCL.

3. The name of the corporation surviving the merger is Cryptometrics, Inc., a Delaware corporation (the “Surviving Corporation”).

4. The Certificate of Incorporation of Cryptometrics, Inc., as now in force and effect, shall continue to be the Certificate of Incorporation of the Surviving Corporation until amended and changed pursuant to the provisions of the DGCL.

5. The Bylaws of Cryptometrics, Inc., as now in full force and effect, shall continue to be the Bylaws of the Surviving Corporation until amended and changed pursuant to the provisions of the DGCL.

6. The officers and directors of Cryptometrics, Inc. immediately prior to the filing of this Certificate of Merger with the Secretary of State of the State of Delaware shall remain the officers and directors of the Surviving Corporation, each to hold office until their respective death, permanent disability, resignation or removal or until their respective successors are duly elected and qualified, all in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation and the DGCL.

7. The executed Agreement and Plan of Merger is on file at an office of the Surviving Corporation, the address of which is as follows:

Cryptometrics, Inc. 73 Main Street Tuckahoe, New York 10707

8. A copy of the Agreement and Plan of Merger will be furnished by the Surviving Corporation, on request and without cost, to any stockholder of either Constituent Corporation.

9. This Certificate of Merger, and the merger provided for herein, shall be effective immediately upon its filing with the Secretary of State of the State of Delaware.

IN WITNESS WHEREOF, this Certificate of Merger has been duly executed on [ ].

CRYPTOMETRICS, INC.


	By:

Name: Robert Barra


	Title:	Co-Chief Executive Officer

[NOTE: Bracketed language did not appear in original text but will be added in Certificate as filed]

EXHIBIT C

AFFILIATE AGREEMENT

January , 2006

JAG Media Holdings, Inc.

6865 SW 18th Street, Suite B13

Boca Raton, Florida 33433

Ladies and Gentlemen:

The undersigned has been advised that as of the date of this letter it may be deemed to be an “affiliate” of Cryptometrics, Inc., a Delaware corporation (the “COMPANY”), as the term “affiliate” is defined for purposes of paragraphs (c) and (d) of Rule 145 of the rules and regulations (the “RULES AND REGULATIONS”) of the Securities and Exchange Commission (the “COMMISSION”) under the Securities Act of 1933, as amended (the “ACT”). Pursuant to the terms of the Agreement and Plan of Merger, dated as of December 8, 2005 (the “MERGER AGREEMENT”), by and among JAG Media Holdings, Inc. (“PARENT”), Cryptometrics Acquisition Corp., a wholly-owned subsidiary of Parent (“MERGER SUB”) and the Company, Merger Sub will be merged with and into the Company (the “MERGER”) and the Company, as the entity surviving the Merger, will become a wholly owned subsidiary of Parent.

As a result of the Merger, the undersigned will receive shares of common stock, par value $0.00001 per share, of Parent (the “PARENT COMMON STOCK”), in exchange for common stock, par value $0.001 per share, of the Company owned by the undersigned immediately prior to the effective time of the Merger.

The undersigned hereby represents and warrants to, and covenants with, Parent that in the event that it receives any Parent Common Stock as a result of the Merger:

A. The undersigned shall not make any sale, transfer or other disposition of the Parent Common Stock in violation of the Act or the Rules and Regulations.

B. The undersigned has carefully read this letter, the Merger Agreement and the Voting Agreement (defined below) and discussed the requirements of these documents and other applicable limitations upon the undersigned’s ability to sell, transfer or otherwise dispose of the Parent Common Stock, to the extent the undersigned deemed necessary, with his or her counsel or counsel for the Company.

C. The undersigned has been advised that any issuance of Parent Common Stock to him or her pursuant to the Merger has been, or will be, registered with the Commission under the Act on a registration statement on a Form S-4. However, the undersigned has also been advised that, since at the time the Merger was submitted for a vote of the stockholders of the Company, (1) the undersigned may be deemed to have been an affiliate of the Company and (2) except as set forth in the Company Voting and Lock-Up Agreement dated as of December 8, 2005, by and among Parent, Robert Barra and Michael A. Vitale (the “Voting Agreement”), the undersigned may not sell, transfer or otherwise dispose of any Parent Common Stock issued to it in the Merger unless (a) such sale, transfer or other disposition has been registered under the Act, (b) such sale, transfer or other disposition is made in conformity with Rule 145 (as that rule may be hereafter amended) promulgated by the Commission under the Act, or (c) Parent shall have received either an opinion of counsel or a “no action” letter obtained by the undersigned from the staff of the Commission, to the effect that such sale, transfer or other disposition is otherwise exempt from registration under the Act.

D. The undersigned also understands that, except as set forth in the Merger Agreement, Parent is under no obligation to register the sale, transfer or other disposition of the Parent Common Stock by the undersigned or on his or her behalf under the Act or to take any other action necessary in order to comply with any available exemption from the registration requirements of the Act. The undersigned also understands that stop transfer instructions will be given to Parent’s transfer agents with respect to the Parent Common Stock and that there

will be placed on the certificates for the Parent Common Stock issued to the undersigned, or any substitutions therefor, a legend stating in substance:

“THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), APPLIES, AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IN COMPLIANCE WITH THE REQUIREMENTS OF RULE 145 OR PURSUANT TO A REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT.”

E. The undersigned also understands that unless the transfer by it of Parent Common Stock has been registered under the Act or is a sale made in conformity with the provisions of Rule 145, Parent reserves the right to place the following legend on the certificates issued to the undersigned’s transferee:

“THE SALE OF THE SHARES REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND SUCH SHARES WERE ACQUIRED FROM A PERSON WHO RECEIVED THESE SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE ACT APPLIES. THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE ACT, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO A REGISTRATION STATEMENT UNDER THAT ACT OR IN ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT.”

F. Execution of this letter shall not be considered an admission on the part of the undersigned that he or she is an “affiliate” of the Company as described in the first paragraph of this letter, nor as a waiver of any rights the undersigned may have to object to any claim that he is such an affiliate after the date of this letter.

It is understood and agreed that the legends set forth in paragraphs D and E above shall be removed by delivery of substitute certificates without any legend if either of these legends are not required for purposes of the Act or this letter. It is understood and agreed that these legends and the stop transfer orders referred to above will be removed if (i) evidence or representations satisfactory to Parent and its Transfer Agent that the Parent Common Stock represented by the certificates are being or have been sold in a transaction made in conformity with the provisions of Rule 145(d) (as that rule may be hereafter amended), (ii) one year shall have elapsed from the date the undersigned acquired the Parent Common Stock in the Merger and the provisions of Rule 145(d)(2) are then available to the undersigned, (iii) two years shall have elapsed from the date the undersigned acquired the Parent Common Stock in the Merger and the provisions of Rule 145(d)(3) are then available to the undersigned, (iv) Parent has received either an opinion of counsel or a “no action” letter obtained by the undersigned from the staff of the Commission, to the effect that the restrictions imposed by Rule 145 under the Act no longer apply to the undersigned, or (v) the shares represented by the certificates having such legend(s) are the subject of an effective registration statement under the Act.

Name


	Title:

Accepted this th day of

January, 2006 by

JAG MEDIA HOLDINGS, INC.


	By:

Name:


	Title:

APPENDIX C-2

JAG Media Holdings, Inc.
6865 S.W. 18th Street, Suite B13
Boca Raton, FL 33433

January 24, 2007

Cryptometrics, Inc.

73 Main Street

Tuckahoe, NY 10707

Re: Agreement and Plan of Merger Among JAG Media Holdings, Inc. (“JAG Media”), Cryptometrics Acquisition, Inc., Cryptometrics, Inc. (“Cryptometrics”), Robert Barra and Michael Vitale dated December 27, 2005 (“Merger Agreement”)

Gentlemen:

This will serve to confirm our understanding that the Merger Agreement is amended as follows:

1. The first paragraph of Section 2.1 of the Merger Agreement is deleted in its entirety and a new paragraph will be substituted therefore, which shall read as follows:

2.1 Effect on Capital Stock. At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, Company or any stockholder of Company (each such stockholder, a “Company Stockholder”): The holders of all shares of common stock of Company, par value $0.001 per share (the “Company Common Stock”) (each such share of Company Common Stock, a “Company Share”), issued and outstanding immediately prior to the Effective Time, including as outstanding for this purpose the total number of shares of Company Common Stock for which outstanding exchangeable shares of the Company’s Canadian subsidiary can be exchanged (“Outstanding Company Common Stock” and each an “Outstanding Company Share”) shall be entitled to receive shares of fully paid and nonassessable common stock of Parent, par value $0.00001 per share (“Parent Common Stock”) aggregating 394,700,016 shares of Parent Company Common Stock (the “Merger Consideration”).

2. Sub-section (B) of Section 2.2 (g) of the Merger Agreement shall be deleted in its entirety and a new sub-section (B) shall be substituted therefore, which shall read as follows:

(B) subject to compliance with securities laws, the remaining 35% of such shares may be freely sold or transferred even within the first year following the Closing Date.

3. The condition to Closing specified in Section 8.1 (e) of the Merger Agreement, which requires the listing of the Parent Common Stock on the NASDAQ Capital Market as a condition to the closing and the related termination right specified in Section 9.1 (a) (iv) (C) are hereby waived by the parties. Accordingly, Sections 8.1 (e) and 9.1 (a) (iv) (C) are deleted in their entirety and new provisions shall be substituted therefore, which shall read as follows:

8.1 (e) The shares of Parent Common Stock shall have been authorized for trading on the OTC Bulletin Board (“OTCBB”) or the OTC Pink Sheets (“Pink Sheets”) whether or not such authorization shall have been cancelled.

9.1 (a) (iv) (C) if Parent Common Stock is not authorized for trading on the OTCBB or Pink Sheets on or prior to the Effective Time.

4. Cryptometrics hereby approves that certain letter agreement between JAG Media and Cornell Capital Partners, LP (“Cornell Capital”) dated January 24, 2007 (“Cornell Letter Agreement”), which provides for certain modifications to the debentures and warrants currently held by Cornell Capital and agrees that the indebtedness limitation (including any descriptions of convertible debenture of JAG Media), whether in the form of representations, covenants or conditions, contained in the Merger Agreement shall be increased from the principal amount of $2,750,000 to the principal amount of $4,350,000.

5. Simultaneously with the execution of this agreement, Cryptometrics shall pay (a) the $100,000.00 payment required pursuant to paragraph 14 of that certain term sheet dated September 9, 2006 between JAG Media and Cryptometrics and (b) $175,000 ($10,000 of which has already been advanced by Cryptometrics), to be used by JAG Media for legal, accounting, printing and other costs incurred by JAG Media in connection with (i) the Closing; (ii) the preparation and filing of any supplements and/or post-effective amendments to the S-4 Registration Statement; (iii) the preparation and filing of JAG Media’s Form 10-QSB for its quarter ending October 31, 2006; (iv) the preparation and filing of this agreement, the Cornell Letter Agreement, any related agreements or documents and any related press releases; and (v) any SEC filings and press releases required or desirable in connection with any of the foregoing. Such payments, totaling $275,000.00, shall be made by Cryptometrics via wire transfer in accordance with the written wire instructions dated December 1, 2006 that have been furnished to Cryptometrics by JAG Media.

6. Cryptometrics has completed its audited financials for its fiscal year ended April 30, 2006 and its unaudited financials for its quarter ended July 31, 2006 and shall provide JAG Media with copies of such financials upon execution of this agreement. Cryptometrics’ accountants are currently in the process of completing its unaudited financials for its quarter ended October 31, 2006 which financials shall be completed no later than January 26, 2007, at which time Cryptometrics shall provide JAG Media with a copy of such unaudited financials.

7. Promptly after the execution of this agreement and payment of the $275,000.00 payment referenced in paragraph 5 above, JAG Media shall cause to be prepared, for Cryptometrics’ prompt review, an appropriate post-effective amendment to the S-4 Registration Statement, which shall include pro forma financials for JAG Media and Cryptometrics based on relevant audited and unaudited financials for both companies (“Post-Effective Amendment”). No later that three (3) business days after the Post-Effective Amendment has been declared effective by the U.S. Securities and Exchange Commission, Cryptometrics shall mail the Consent Solicitation and Prospectus included in the Post-Effective Amendment to its stockholders and obtain the written consent of a majority of the stockholders of Cryptometrics to the Merger (“Cryptometrics Stockholders’ Consent”). A copy of the Cryptometrics Stockholders’ Consent shall be delivered to JAG Media no later than two (2) days after its execution. After JAG Media receives the Cryptometrics Stockholders’ Consent, JAG Media shall immediately (a) rescind the amendments to its By-Laws adopted by an instrument dated March 22, 2006 (“Rescinded By-Law Amendment”); (b) cause to be formed a new limited liability company into which Cryptometrics, Inc. can be merged after it’s merger with Cryptometrics Acquisition, Inc.; and (c) have its attorneys prepare the certificates of merger for the Merger and the merger referred to in paragraph 7 (b) hereof (along with related resolutions or written consents) and filing instructions therefor, the filing of which will be an assumption of the tax opinion. The documents in connection with the formation of the limited liability company described in 7 (b) above (along with any related resolutions or written consents) and the form of certificate of merger for the merger referred to in paragraph 7 (b) hereof shall be delivered to Cryptometrics at or prior to the time the Merger Documents (as hereinafter defined) are delivered to the “Escrow Agent.”

8. Subject to satisfaction or waiver of the conditions to the Closing set forth in the Merger Agreement, the Closing Date shall be February 28, 2007, or such other date as the parties may agree upon. On the Closing Date and as an integral part of the Merger, Cryptometrics Inc., as the surviving Company of the Merger, shall immediately merge into a limited liability company wholly-owned by JAG Media.

9. If the Closing does not occur for any reason by March 15, 2007 the Merger Agreement shall automatically terminate, unless the parties agree otherwise in writing (“Automatic Termination Date”). Any such termination of the Merger Agreement shall be deemed a termination pursuant to Section 9.1 (a) (i) of the Merger Agreement.

10. (A) Within three (3) business days after the effective date of the Post-Effective Amendment, JAG Media shall deliver to Karlen & Stolzar, LLP, as escrow agent (“Escrow Agent”), (i) a certificate of merger effecting the merger of Cryptometrics Acquisition, Inc. into Cryptometrics, Inc. (“Certificate of Merger”); (ii) a resolution or written consent of the Board of Directors of JAG Media approving the Merger, including any new or amended terms reflected in this agreement or any subsequent written agreement signed by the parties to the Merger Agreement, and authorizing JAG Media, as the sole stockholder of Cryptometrics Acquisition,

Inc., to approve the merger of Cryptometrics Acquisition, Inc. into Cryptometrics, Inc. and sign the Certificate of Merger; (iii) resolutions or written consents of the sole shareholder and Board of Directors of Cryptometrics Acquisition, Inc. approving the merger of Cryptometrics Acquisition, Inc. into Cryptometrics and authorizing the signature and filing of the Certificate of Merger; (iv) a resolution or written consent of the board of directors of JAG Media electing Robert Barra and Michael Vitale as the only members of the board of directors of JAG Media, conditioned upon the effectiveness of the Merger; (v) written resignations of Messers. Thomas J. Mazzarisi and Stephen J. Schoepfer from their positions as directors, officers and members of JAG Media and its subsidiaries, effective immediately upon the filing of the Certificate of Merger; (vi) the tax opinion to be provided by JAG Media’s attorneys pursuant to the Merger Agreement; and (vii) the Rescinded By-Law Amendment and Cryptometrics shall deliver to Escrow Agent any Affiliate Agreements required to be delivered pursuant to the Merger Agreement (“collectively, the “Merger Documents”).

(B) Escrow Agent shall hold the Merger Documents in escrow until the first to occur of the following: (i) the Closing not occurring by the Automatic Termination Date; (ii) the Merger Agreement being terminated by either JAG Media or Cryptometrics; or (iii) delivery of the Closing Notice (as hereinafter defined) prior to the Automatic Termination Date. In the event of either of the occurrences set forth in items (B) (i) or (ii) above, the Merger Documents shall be immediately returned to JAG Media by Escrow Agent. In the event Cryptometrics delivers the Closing Notice (as hereinafter defined) to JAG Media and Escrow Agent and the Closing occurs prior to the Automatic Termination Date, the Merger Documents shall be delivered immediately to Cryptometrics by Escrow Agent and Cryptometrics shall cause the Certificate of Merger to be immediately filed in the appropriate government office(s) in the appropriate state jurisdiction(s) that same day. “Closing Notice” means the signed written notice from Cryptometrics to JAG Media and Escrow Agent notifying them (via facsimile and e-mail) that Cryptometrics has irrevocably elected to proceed with the Closing and instructing Escrow Agent to release the Merger Documents from escrow in accordance with this agreement, which notice shall be in the form and substance attached hereto as ANNEX 1.

(C) Escrow Agent shall date all Merger Documents as of the date of filing of the Certificate of Merger and Escrow Agent shall provide JAG Media a copy of the filed and stamped Certificate of Merger and the remaining Merger Documents, as dated by Escrow Agent, promptly after the filing of the Certificate of Merger. Further, upon the filing of the Certificate of Merger, Cryptometrics shall immediately provide JAG Media with a notification via e-mail confirming that the Certificate of Merger has been filed and the date and time of such filing. Such e-mail notification shall be sent to Thomas J. Mazzarisi at tjmazzarisi@jagmedia.biz, with a copy to Stephen J. Schoepfer at steve@jagnotes.com.

(D) Notwithstanding (i) anything to the contrary set forth in this agreement and (ii) receipt by Escrow Agent of any instructions from Cryptometrics to release the Merger Documents from escrow, Escrow Agent shall not release the Merger Documents from escrow prior to the expiration of fifteen (15) days from the date the Consent Solicitation and Prospectus included in the Post-Effective Amendment is mailed by Cryptometrics to its stockholders.

(E) Escrow Agent’s duties and liabilities shall be limited as follows:

(i) The duties and responsibilities of Escrow Agent hereunder shall be determined solely by the express provisions of this paragraph 10, and no other or further duties or responsibilities shall be implied.

(ii) Escrow Agent may rely and shall be protected in acting or refraining from acting upon any written notice, instruction or request provided for and furnished to it pursuant to the terms of this paragraph 10 and believed by it to be genuine and to have been signed or presented by the proper party or parties. Escrow Agent shall be under no duty to inquire into or investigate the validity, accuracy or content of any document or agreement. Escrow Agent shall have no duty to solicit any item that may be due it hereunder.

(iii) Escrow Agent shall not be liable for any action taken or omitted by it in good faith unless a court of competent jurisdiction determines that Escrow Agent’s willful misconduct or gross negligence was the cause of any loss to either of the parties.

(iv) In the event of any disagreement relating to the Merger Documents or the disposition thereof resulting in adverse claims or demands being made in connection with the Merger Documents, or in the event that the Escrow Agent is in doubt as to what action it should take hereunder, Escrow Agent shall be entitled to retain the Merger Documents until Escrow Agent shall have received a final non-appealable order of a court of competent jurisdiction directing delivery of the Merger Documents, in which event Escrow Agent shall deliver the Merger Documents in accordance with such order without further question. If a proceeding for such determination is not begun and diligently continued, Escrow Agent may make an ex parte application, or bring any appropriate action, for leave to deposit the Merger Documents in the Supreme Court of the State of New York, County of New York seeking such determination or such declaratory relief as Escrow Agent shall deem reasonably necessary under the circumstances, and the parties each hereby irrevocably consent to the entering of an ex parte order pursuant to all applicable laws, rules and procedures of the State of New York and such court. Escrow Agent shall be reimbursed by Cryptometrics and JAG Media for all of Escrow Agent’s reasonable costs and expenses of such action or proceeding, including, without limitation, reasonable attorneys’ fees and disbursements, which reimbursable costs and expenses shall be shared equally by Cryptometrics and JAG Media.

(v) Escrow Agent may at any time resign by giving ten (10) days written notice of resignation to JAG Media and Cryptometrics. Upon receiving such notice of resignation, JAG Media and Cryptometrics shall promptly appoint a successor and, upon the acceptance by the successor of such appointment, release the resigning Escrow Agent from its obligations hereunder by written instrument, a copy of which instrument shall be delivered to the resigning Escrow Agent and the successor. If no successor shall have been so appointed and have accepted appointment within forty-five (45) days after the giving of such notice of resignation, the resigning Escrow Agent may petition any court of competent jurisdiction for the appointment of a successor.

11. Upon request of any parties to the Merger Agreement delivered no later than ten (10) business days following the execution of this agreement by all the parties hereto, the parties to the Merger Agreement shall furnish to each other their respective disclosure schedules pursuant to the Merger Agreement no later than ten (10) business days following the delivery of the foregoing request. Any such request by JAG Media shall be made by e-mail to Robert Barra (rbarra@cryptometrics.com) and any such request by Cryptometrics shall be made by e-mail to Thomas J. Mazzarisi (tjmazzarisi@jagmedia.biz). Any such request by JAG Media shall also be deemed a request to Messers Barra and Vitale individually as parties to the Merger Agreement.

12. Thomas J. Mazzarisi and Stephen J. Schoepfer agree that they shall not exercise their options to acquire JAG Media common stock (“Options”) prior to the first to occur of the Closing, the Automatic Termination Date or the termination of this agreement. Nothing herein shall restrict Messrs. Mazzarisi and Schoepfer from exercising their Options (or selling the shares underlying the Options) on or after the Closing Date or the termination of this agreement.

13. If JAG Media terminates the Merger Agreement prior to the Automatic Termination Date, JAG Media shall issue to Cryptometrics 500,000 shares of Parent Common Stock.

14. JAG Media shall publicly disclose the contents of this agreement on a Form 8-K or other suitable form within four (4) business days of its execution.

All defined terms used in this agreement, which are not otherwise defined herein shall have the meaning ascribed to them in the Merger Agreement. Except as otherwise set forth in this agreement, the Merger Agreement shall remain unchanged and in full force and effect.

If the foregoing accurately reflects your understanding of our agreements regarding the above matters, please indicate your agreement and acceptance by signing in the appropriate space below and returning a fully executed and dated copy of this agreement to the undersigned.

[Signatures appear on next page]

ANNEX 1

[CRYPTOMETRICS LETTERHEAD]

, 2007

VIA FACSIMILE (866.297.1070)

& E-MAIL (TJMAZZARISI@JAGMEDIA.BIZ)

JAG Media Holdings, Inc.

6865 S.W. 18^th Street, Suite B13

Boca Raton, FL 33433


Attention:	Thomas J. Mazzarisi Chairman & CEO

-and-

VIA FACSIMILE (914.682.0387)

& E-MAIL (MISTOLZAR@KARLENSTOLZAR.COM)

Karlen & Stolzar, LLP

White Plains Plaza

One North Broadway — Suite 800

White Plains, NY 10601

Attention: Michael I. Stolzar, Esq.

Re:

Letter Agreement dated January 24, 2007 Among JAG Media Holdings, Inc. (“JAG Media”), Cryptometrics, Inc. (“Cryptometrics”), Cryptometrics Acquisition, Inc., Robert Barra, Michael Vitale and Karlen & Stolzar, LLP, as escrow agent thereunder (“Escrow Agent”), which amended various terms of the Agreement and Plan of Merger Among JAG Media, Cryptometrics and Cryptometrics Acquisition, Inc. dated December 27, 2005 (“Amendment”)

Gentlemen:

This will serve as Cryptometrics’ written notice, pursuant to paragraph 10 of the Amendment, that Cryptometrics is hereby irrevocably (i) electing to proceed with the Closing and (ii) instructing Escrow Agent to release the “Merger Documents” from escrow in accordance with the Amendment.

Cryptometrics acknowledges and agrees that it shall receive and accept the “Merger Documents” from Escrow Agent and perform its obligations with respect to the “Merger Documents” as set forth in the Amendment.

Very truly yours,
CRYPTOMETRICS, INC.


	By:

Name: Robert Barra

Title: Co-CEO

Cc: Stephen J. Schoepfer
(Fax: 866.297.1072/E-Mail: steve@jagnotes.com)

APPENDIX C-3

JAG MEDIA HOLDINGS, INC.
6865 S.W. 18th Street, Suite B13
Boca Raton, FL 33433

February 26, 2007

Cryptometrics, Inc.

73 Main Street

Tuckahoe, NY 10707


	Re:	Agreement Amending Merger Agreement Among JAG Media Holdings, Inc. (“JAG Media”), Cryptometrics Acquisition, Inc. (“Cryptometrics Acquisition”), Cryptometrics, Inc. (“Cryptometrics”), Robert Barra, Michael Vitale, Karlen & Stolzar dated as of January 24, 2007 (“Merger Agreement Amendment”)

Gentlemen:

This will confirm our understanding of an extension of the “Closing Date” and “Automatic Termination Date” by making the following changes in the Merger Agreement Amendment, which have been authorized by the directors of JAG Media, Cryptometrics Acquisition and Cryptometrics:

1. The first sentence of paragraph 8 of the Merger Agreement Amendment is deleted in its entirety and a new sentence is substituted in its place, which shall read, in full, as follows:

“Subject to satisfaction or waiver of the conditions to the Closing set forth in the Merger Agreement, the Closing Date shall be March 30, 2007, or such other date as the parties may agree upon, being so authorized by their respective boards of directors.”

2. The first sentence of paragraph 9 of the Merger Agreement Amendment is deleted in its entirety and a new sentence is substituted in its place, which shall read, in full, as follows:

“If the Closing does not occur for any reason by April 6, 2007 the Merger Agreement shall automatically terminate, unless the parties agree otherwise in writing (“Automatic Termination Date”), being so authorized by their respective boards of directors.”

If the foregoing accurately reflects your understanding of our agreement regarding the above matter, please indicate your agreement and acceptance by signing in the appropriate space below and returning a fully executed and dated copy of this agreement to the undersigned.

Sincerely yours,

JAG MEDIA HOLDINGS, INC.


	By:	/s/ Thomas J. Mazzarisi

Name: Thomas J. Mazzarisi

Title: Chairman & CEO

Appendix C-4

JAG Media Holdings, Inc.

6865 S.W. 18th Street, Suite B13

Boca Raton, FL 33433

April 2, 2007

Cryptometrics, Inc.
73 Main Street
Tuckahoe, NY 10707

Re:

Gentlemen:

This will confirm our understanding of an extension of the “Automatic Termination Date” by making the following changes in the Merger Agreement Amendment, which have been authorized by the directors of JAG Media, Cryptometrics Acquisition and Cryptometrics:

1. The first sentence of paragraph 9 of the Merger Agreement Amendment is deleted in its entirety and a new sentence is substituted in its place, which shall read, in full, as follows:

“If the Closing does not occur for any reason by April 20 2007 the Merger Agreement shall automatically terminate, unless the parties agree otherwise in writing (ÒAutomatic Termination DateÓ), being so authorized by their respective boards of directors.”

Appendix C-5

JAG Media Holdings, Inc.
6865 S.W. 18th Street, Suite B13
Boca Raton, FL 33433

April 20, 2007

Cryptometrics, Inc.
73 Main Street
Tuckahoe, NY 10707

Re: Agreement Amending Merger Agreement Among JAG Media Holdings, Inc. (“JAG Media”), Cryptometrics Acquisition, Inc. (“Cryptometrics Acquisition”), Cryptometrics, Inc. (“Cryptometrics ”), Robert Barra, Michael Vitale, Karlen & Stolzar, Thomas J. Mazzarisi and Stephen J. Schoepfer (collectively, the “Parties”) dated as of January 24, 2007, as Further Amended by those Certain Agreements Among the Parties dated as of February 26, 2007 and April 2, 2007 (“Merger Agreement Amendment”)

Gentlemen:

This will confirm our understanding regarding the following changes to the Merger Agreement Amendment, which have been authorized by the directors of JAG Media, Cryptometrics Acquisition and Cryptometrics:

1. The Automatic Termination Date of April 20, 2007 set forth in the first sentence of paragraph 9 of the Merger Agreement Amendment is hereby changed to May 11, 2007.

All defined terms used in this agreement, which are not otherwise defined herein shall have the meaning ascribed to them in the Merger Agreement Amendment, Except as otherwise set forth in this agreement, the Merger Agreement Amendment and the Merger Agreement shall remain unchanged and in full force and effect.

[SIGNATURES APPEAR ON NEXT PAGE]

Appendix C-6

JAG Media Holdings, Inc.
6865 S.W. 18th Street, Suite B13
Boca Raton, FL 33433

May 11, 2007

Cryptometrics, Inc.
73 Main Street
Tuckahoe, NY 10707


Re:		Agreement Amending Merger Agreement Among JAG Media Holdings, Inc. (“JAG Media”), Cryptometrics Acquisition, Inc. (“Cryptometrics Acquisition”), Cryptometrics, Inc. (“Cryptometrics”), Robert Barra, Michael Vitale, Karlen & Stolzar, Thomas J. Mazzarisi and Stephen J. Schoepfer (collectively, the “Parties”) dated as of January 24, 2007, as Further Amended by those Certain Agreements Among the Parties dated as of February 26, 2007, April 2, 2007 and April 20, 2007 (“Merger Agreement Amendment”)

Gentlemen:

1. The Automatic Termination Date of May 11, 2007 set forth in the first sentence of paragraph 9 of the Merger Agreement Amendment is hereby changed to May 18, 2007.

[SIGNATURES APPEAR ON NEXT PAGE]

JAG MEDIA HOLDINGS, INC.
6865 S.W. 18th Street, Suite B13
Boca Raton, FL 33433

Re:    Agreement Amending Merger Agreement Among JAG Media Holdings, Inc. (“JAG
        Media”), Cryptometrics Acquisition, Inc. (“Cryptometrics Acquisition”),
        Cryptometrics, Inc. (“Cryptometrics”), Robert Barra, Michael Vitale,
        Karlen & Stolzar, Thomas J. Mazzarisi and Stephen J. Schoepfer
        (collectively, the “Parties”) dated as of January 24, 2007, as Further
        Amended by those Certain Agreements Among the Parties dated as of February
        26, 2007, April 2, 2007, April 20, 2007 and May 11, 2007 (“Merger
        Agreement Amendment”)

1. The Automatic Termination Date of May 18, 2007 set forth in the first sentence of paragraph 9 of the Merger Agreement Amendment is hereby changed to June 15, 2007.

2. Contemporaneously with the execution of this agreement, Cryptometrics shall pay $167,659.84 in additional transaction costs, which amount shall be paid on behalf of JAG Media, to the relevant legal and accounting firms providing services to JAG Media in connection with the transaction. Such payments shall be made by Cryptometrics via wire transfer directly to such parties, in accordance with wire transfer instructions to be provided by JAG Media.

3. Cryptometrics also agrees to pay on behalf of JAG Media up to $150,000 of various remaining transaction costs, not covered by the payments in paragraph 2 above, incurred prior to any termination of the Merger Agreement, required to close the transaction as and when those payments become due and payable, which costs are currently estimated to be approximately $150,000.

4. In consideration of the payments agreed to be made in paragraph 2 above, JAG Media hereby grants (and shall, within five business days after payment of the amounts in paragraph 2 above, cause to be granted by Pixaya (UK) Limited (“Pixaya”)) to Cryptometrics a non-exclusive, royalty free, perpetual, with rights of survivorship,

personal license to use all of its source codes and related design and development documents and other intellectual property (excluding the SurvayaCam and Pixaya names and marks) related to all of its current Pixaya products including its Pixaya SurvayaCam product (collectively, the “Licensed Property”) solely for the purpose of allowing Cryptometrics and its subsidiaries to develop and exploit their own lines of products (“Licensed Products”) by incorporating Licensed Property therein; but not for use in any stand-alone product that competes directly with a current product of Pixaya other than facial recognition, access control, critical infrastructure protection or intelligent video analysis products/systems, and Cryptometrics and its subsidiaries shall not disclose to any third party such source codes or any other trade secret information included within the Licensed Property. Except as expressly set forth in this paragraph 4, nothing herein contained shall be construed as a grant of any rights or licenses to any JAG Media or Pixaya technology or intellectual property. JAG Media, on behalf of itself and Pixaya, disclaims any and all warranties, express or implied, including without limitation any warranty of merchantability, fitness for any particular use or purpose, or of non-infringement of any third party rights. Cryptometrics shall indemnify, defend and hold harmless JAG Media, Pixaya and their respective officers, directors, employees and representatives, of and from any and all claims and liability arising out of or in connection with the commercialization of any Licensed Product or use pursuant to this paragraph 4 of any Licensed Property. JAG Media represents and warrants to CryptoMetrics that Pixaya is its wholly owned subsidiary and that JAG Media has the power to cause it to grant the license referred to herein.

5. If the Merger Agreement is terminated by JAG Media or Cornell Capital for any reason, JAG Media shall issue to Cryptometrics 500,000 shares of Parent Common Stock (in addition to the 500,000 shares previously agreed upon in the amendment to the Merger Agreement dated January 24, 2007), Notwithstanding the foregoing, if Cryptometrics fails to pay any amounts pursuant to paragraph 3 above and/or if the S-4 registration statement is declared effective and Cryptometrics fails to close the transaction and file the certificate of merger by the Automatic Termination Date then in effect, Cryptometrics shall not be entitled to receive the 500,000 shares of Parent Common Stock referenced above.


Sincerely yours,		AGREED AND ACCEPTED:
JAG MEDIA HOLDINGS, INC.		CRYPTOMETRICS ACQUISITION, INC.

By: /s/ Thomas J. Mazzarisi Name: Thomas J. Mazzarisi Title: Chairman & CEO Date: May 18, 2007	By: /s/ Thomas J. Mazzarisi Name: Thomas J. Mazzarisi Title: President Date: May 18, 2007

AGREED AND ACCEPTED:		*The undersigned is signing this*
CRYPTOMETRICS, INC.		*agreement solely in its capacity as*
		*“Escrow Agent“ pursuant to the*
		*provisions of paragraph 10*
		*of the Merger Agreement Amendment*


By: /s/ Robert Barra Name: Robert Barra Title: Co-CEO Date: May 18, 2007	KARLEN & STOLZAR, LLP By: /s/ Michael I.Stolzar Name: Michael I.Stolzar Title: Partner Dated: May 18, 2007

		*The undersigned are signing this*
		*agreement only with respect to their*
		*obligations set forth*
/s/ Robert Barra		in paragraph 12 of the Merger Agreement Amendment
Robert Barra Dated: May 18, 2007

	/s/ Thomas J. Mazzarisi Thomas J. Mazzarisi Dated: May 18, 2007


By: /s/ Michael Vitale Michael Vitale Dated: May 18, 2007	By: /s/ Stephen J. Schoepfer Stephen J. Schoepfer Dated: May 18, 2007

APPENDIX C-8

JAG Media Holdings, Inc.
6865 S.W. I8th Street, Suite B13
Boca Raton, FL 33433

June 15, 2007

Cryptometrics, Inc.
73 Main Street
Tuckahoe, NY 10707


	Re:	Agreement Amending Merger Agreement Among JAG Media Holdings, Inc. (“JAG Media”), Cryptometrics Acquisition, Inc. (“Cryptometrics Acquisition”), Cryptometrics, Inc. (“Cryptometrics”), Robert Barra, Michael Vitale, Karlen& Stolzar, Thomas J. Mazzarisi and Stephen J. Schoepfer (collectively, the “Parties”) dated as of January 24, 2007, as Further Amended by those Certain Agreements Among the Parties dated as of February 26, 2007, April 2, 2007, April 20, 2007, May 11, 2007 and May 18, 2007 (“Merger Agreement Amendment”)

Gentlemen:

1. The Closing Date set forth in the first sentence of paragraph 8 of the Merger Agreement Amendment is hereby changed to July 16, 2007.

2. The Automatic Termination Date of June 15, 2007 set forth in the first sentence of paragraph 9 of the Merger Agreement Amendment is hereby changed to July 16, 2007.

3. The fifteen (15) day restriction regarding the release of the Merger Documents from escrow set forth in subparagraph 10. (D) of the Merger Agreement Amendment is hereby changed to ten (10) days.

Appendix C-10

JAG Media Holdings, Inc.

6865 S.W. 18th Street, Suite B13

Boca Raton, FL 33433

As of August 16, 2007

Cryptometrics, Inc.

73 Main Street

Tuckahoe, NY 10707

Re:

Agreement Amending Merger Agreement Among JAG Media Holdings, Inc. (“JAG Media”), Cryptometrics Acquisition, Inc. (“Cryptometrics Acquisition”), Cryptometrics, Inc. (“Cryptometrics”), Robert Barra, Michael Vitale, Karlen & Stolzar, Thomas J. Mazzarisi and Stephen J. Schoepfer (collectively, the “Parties”) dated as of January 24, 2007, as Further Amended by those Certain Agreements Among the Parties dated as of February 26, 2007, April 2, 2007, April 20, 2007, May 11, 2007, May 18, 2007, June 15, 2007 and July 16, 2007 (“Merger Agreement Amendment”)

Gentlemen:

This will confirm our understanding regarding the following changes to the Merger Agreement and Merger Agreement Amendment, which have been authorized by the directors of JAG Media, Cryptometrics Acquisition and Cryptometrics:

1. The Closing Date set forth in the first sentence of paragraph 8 of the Merger Agreement Amendment is hereby changed to November 2, 2007.

2. The Automatic Termination Date of August 16, 2007 set forth in the first sentence of paragraph 9 of the Merger Agreement Amendment is hereby changed to November 7, 2007.

3. Cryptometrics shall pay up to $200,000 in additional transaction costs on behalf of JAG Media, in addition to the $150,000 in such costs set forth in paragraph 3 of the May 18, 2007 agreement among the Parties (“Additional Transaction Costs”). Cryptometrics shall pay $94,446.39 of the Additional Transaction Costs to JAG Media’s lawyers, accountants, financial printers and other parties in accordance with wire instructions to be furnished by JAG Media and within five (5) days after execution of this agreement and receipt of the relevant wire instructions from JAG Media. The remaining Additional Transaction Costs shall be paid as and when those payments become due and payable in accordance with paragraph 5 below.

4. Notwithstanding anything to the contrary in the Merger Agreement, as amended, JAG Media may issue such options, warrants and shares of Common Stock as it deems necessary or appropriate to address payables, debt and operating expenses of JAG Media (“JAG Media Expenses”), as well as Additional Transaction Costs, provided that such issuances do not result in the issuance of more than 750,000 shares of Common Stock. Proceeds from such issuances shall be allocated 2/3 for JAG Media Expenses (“JAG Media Allocation”) and 1/3 for Additional Transaction Costs (“Cryptometrics Allocation”).

5. The proceeds from the JAG Media Allocation shall be used by JAG Media for JAG Media Expenses. The proceeds from the Cryptometrics Allocation shall be paid to Cryptometrics promptly after receipt of such proceeds by JAG Media. Proceeds from the Cryptometrics Allocation received from time-to-time by JAG Media shall be applied first toward reimbursement of Cryptometrics for Additional Transaction Costs paid by Cryptometrics until such proceeds are exhausted and then toward any Additional Transaction Costs not due and payable at the time to the extent proceeds from the Cryptometrics Allocation are available. If proceeds from the Cryptometrics Allocation are not available at the time JAG Media receives invoices for Additional Transaction Costs Cryptometrics shall promptly pay such invoices.

All defined terms used in this agreement, which are not otherwise defined herein shall have the meaning ascribed to them in the Merger Agreement Amendment. Except as otherwise set forth in this agreement, the Merger Agreement Amendment and the Merger Agreement shall remain unchanged and in full force and effect. The company voting and lock-up agreement executed in connection with the Merger Agreement shall continue in full

APPENDIX C-11

JAG Media Holdings, Inc.

6865 S.W. 18th Street, Suite B13
Boca Raton, FL 33433

November 7, 2007

Cryptometrics, Inc.
73 Main Street
Tuckahoe, NY 10707

Re:

Agreement Amending Merger Agreement Among JAG Media Holdings, Inc. (“JAG Media”), Cryptometrics Acquisition, Inc. (“Cryptometrics Acquisition”), Cryptometrics, Inc. (“Cryptometrics”), Robert Barra, Michael Vitale, Karlen & Stolzar, Thomas J. Mazzarisi and Stephen J. Schoepfer (collectively, the “Parties”) dated as of January 24, 2007, as Further Amended by those Certain Agreements Among the Parties dated as of February 26, 2007, April 2, 2007, April 20, 2007, May 11, 2007, May 18, 2007, June 15, 2007, July 16, 2007 and August 16, 2007 (“Merger Agreement Amendment”)

Gentlemen:

1. The Closing Date set forth in the first sentence of paragraph 8 of the Merger Agreement Amendment is hereby changed to December 14, 2007.

2. The Automatic Termination Date of November 7, 2007 set forth in the first sentence of paragraph 9 of the Merger Agreement Amendment is hereby changed to December 15, 2007.

3. In lieu of delivering the tax opinion for the merger into escrow, as provided in paragraph 10 of the January 24, 2007 amendment to the Merger Agreement, a tax opinion substantially in the form previously filed shall be filed by JAG Media’s attorneys as an exhibit to Amendment No. 3 to the S-4 and a “bring-down” of such tax opinion shall be delivered at Closing by JAG Media’s attorneys upon their receipt of acceptable representation letters from JAG Media and Cryptometrics dated as of the date of the “bring down” of the tax opinion.

4. The “Additional Transaction Costs” to be paid by Cryptometrics pursuant to paragraph 3 of the August 16, 2007 amendment to the Merger Agreement are increased from $200,000 to $300,000.

5. The number of options, warrants and shares of Common Stock that JAG Media may issue to address JAG Media Expenses and Additional Transaction Costs pursuant to paragraph 4 of the August 16, 2007 amendment to the Merger Agreement is hereby increased from 750,000 shares to 1,250,000 shares. All proceeds from the sale of these 1,250,000 shares, regardless of the amount of such proceeds, shall be allocated and distributed 2/3 to JAG Media and 1/3 to Cryptometrics.

C-11-1

APPENDIX C-12

JAG Media Holdings, Inc.

6865 S.W. 18th Street, Suite B13

Boca Raton, FL 33433

February 6, 2008

Cryptometrics, Inc.
73 Main Street
Tuckahoe, NY 10707

Re:

Agreement Amending Merger Agreement Among JAG Media Holdings, Inc. (“JAG Media”), Cryptometrics Acquisition, Inc. (“Cryptometrics Acquisition”), Cryptometrics, Inc. (“Cryptometrics”), Robert Barra, Michael Vitale, Karlen & Stolzar, Thomas J. Mazzarisi and Stephen J. Schoepfer (collectively, the “Parties”) dated as of January 24, 2007, as Further Amended by those Certain Agreements Among the Parties dated as of February 26, 2007, April 2, 2007, April 20, 2007, May 11, 2007, May 18, 2007, June 15, 2007, July 16, 2007, August 16, 2007 and November 7, 2007 (“Merger Agreement Amendment”)

Gentlemen:

1. The Closing Date set forth in the first sentence of paragraph 8 of the Merger Agreement Amendment is hereby changed to March 7, 2008.

2. The Automatic Termination Date of December 15, 2007 set forth in the first sentence of paragraph 9 of the Merger Agreement Amendment is hereby changed to March 31, 2008.

3. Cryptometrics hereby accepts and approves that certain letter agreement between JAG Media and YA Global Investments, LP dated January 31, 2008.

4. JAG Media and Cryptometrics shall hereafter be responsible for paying their own costs and expenses incurred in connection with the transaction. All costs in connection with printing, mailing and otherwise distributing the S-4 and/or Consent Solicitation and Prospectus to the Cryptometrics stockholders shall be a Crypotmetrics cost to be borne solely by Cryptometrics. Cryptometrics acknowledges and agrees that it is not entitled to reimbursement from JAG Media for any transaction costs paid by Cryptometrics to date nor is it entitled to any payments from, or in connection with, the proceeds received by JAG Media from any option or warrant exercises, or share issuances, previously or hereafter made by JAG Media.

C-12-1

APPENDIX D

Excepts from Delaware General Corporation Law (Appraisal Rights)

ss. 262. Appraisal rights

(a) Any stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to subsection (d) of this section with respect to such shares, who continuously holds such shares through the effective date of the merger or consolidation, who has otherwise complied with subsection (d) of this section and who has neither voted in favor of the merger or consolidation nor consented thereto in writing pursuant to § 228 of this title shall be entitled to an appraisal by the Court of Chancery of the fair value of the stockholder’s shares of stock under the circumstances described in subsections (b) and (c) of this section. As used in this section, the word “stockholder” means a holder of record of stock in a stock corporation and also a member of record of a nonstock corporation; the words “stock” and “share” mean and include what is ordinarily meant by those words and also membership or membership interest of a member of a nonstock corporation; and the words “depository receipt” mean a receipt or other instrument issued by a depository representing an interest in one or more shares, or fractions thereof, solely of stock of a corporation, which stock is deposited with the depository.

(b) Appraisal rights shall be available for the shares of any class or series of stock of a constituent corporation in a merger or consolidation to be effected pursuant to ss. 251 (other than a merger effected pursuant to ss. 251(g) of this title), ss. 252, ss. 254, ss. 257, ss. 258, ss. 263 or ss. 264 of this title:

(1) Provided, however, that no appraisal rights under this section shall be available for the shares of any class or series of stock, which stock, or depository receipts in respect thereof, at the record date fixed to determine the stockholders entitled to receive notice of and to vote at the meeting of stockholders to act upon the agreement of merger or consolidation, were either (i) listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders; and further provided that no appraisal rights shall be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the stockholders of the surviving corporation as provided in subsection (f) of ss. 251 of this title.

(2) Notwithstanding paragraph (1) of this subsection, appraisal rights under this section shall be available for the shares of any class or series of stock of a constituent corporation if the holders thereof are required by the terms of an agreement of merger or consolidation pursuant to ss.ss. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock anything except:

a. Shares of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof;

b. Shares of stock of any other corporation, or depository receipts in respect thereof, which shares of stock (or depository receipts in respect thereof) or depository receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or held of record by more than 2,000 holders;

c. Cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a. and b. of this paragraph; or

d. Any combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a., b. and c. of this paragraph.

(3) In the event all of the stock of a subsidiary Delaware corporation party to a merger effected under ss. 253 of this title is not owned by the parent corporation immediately prior to the merger, appraisal rights shall be available for the shares of the subsidiary Delaware corporation.

(c) Any corporation may provide in its certificate of incorporation that appraisal rights under this section shall be available for the shares of any class or series of its stock as a result of an amendment to its certificate of incorporation, any merger or consolidation in which the corporation is a constituent corporation or the sale of all or

substantially all of the assets of the corporation. If the certificate of incorporation contains such a provision, the procedures of this section, including those set forth in subsections (d) and (e) of this section, shall apply as nearly as is practicable.

(d) Appraisal rights shall be perfected as follows:

(1) If a proposed merger or consolidation for which appraisal rights are provided under this section is to be submitted for approval at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record date for such meeting with respect to shares for which appraisal rights are available pursuant to subsection (b) or (c) hereof that appraisal rights are available for any or all of the shares of the constituent corporations, and shall include in such notice a copy of this section. Each stockholder electing to demand the appraisal of such stockholder’s shares shall deliver to the corporation, before the taking of the vote on the merger or consolidation, a written demand for appraisal of such stockholder’s shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such stockholder’s shares. A proxy or vote against the merger or consolidation shall not constitute such a demand. A stockholder electing to take such action must do so by a separate written demand as herein provided. Within 10 days after the effective date of such merger or consolidation, the surviving or resulting corporation shall notify each stockholder of each constituent corporation who has complied with this subsection and has not voted in favor of or consented to the merger or consolidation of the date that the merger or consolidation has become effective; or

(2) If the merger or consolidation was approved pursuant to ss. 228 or ss. 253 of this title, then either a constituent corporation before the effective date of the merger or consolidation or the surviving or resulting corporation within 10 days thereafter shall notify each of the holders of any class or series of stock of such constituent corporation who are entitled to appraisal rights of the approval of the merger or consolidation and that appraisal rights are available for any or all shares of such class or series of stock of such constituent corporation, and shall include in such notice a copy of this section. Such notice may, and, if given on or after the effective date of the merger or consolidation, shall, also notify such stockholders of the effective date of the merger or consolidation. Any stockholder entitled to appraisal rights may, within 20 days after the date of mailing of such notice, demand in writing from the surviving or resulting corporation the appraisal of such holder’s shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such holder’s shares. If such notice did not notify stockholders of the effective date of the merger or consolidation, either (i) each such constituent corporation shall send a second notice before the effective date of the merger or consolidation notifying each of the holders of any class or series of stock of such constituent corporation that are entitled to appraisal rights of the effective date of the merger or consolidation or (ii) the surviving or resulting corporation shall send such a second notice to all such holders on or within 10 days after such effective date; provided, however, that if such second notice is sent more than 20 days following the sending of the first notice, such second notice need only be sent to each stockholder who is entitled to appraisal rights and who has demanded appraisal of such holder’s shares in accordance with this subsection. An affidavit of the secretary or assistant secretary or of the transfer agent of the corporation that is required to give either notice that such notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. For purposes of determining the stockholders entitled to receive either notice, each constituent corporation may fix, in advance, a record date that shall be not more than 10 days prior to the date the notice is given, provided, that if the notice is given on or after the effective date of the merger or consolidation, the record date shall be such effective date. If no record date is fixed and the notice is given prior to the effective date, the record date shall be the close of business on the day next proceeding the day on which the notice is given.

(e) Within 120 days after the effective date of the merger or consolidation, the surviving or resulting corporation or any stockholder who has complied with subsections (a) and (d) hereof and who is otherwise entitled to appraisal rights, may file a petition in the Court of Chancery demanding a determination of the value of the stock of all such stockholders. Notwithstanding the foregoing, at any time within 60 days after the effective date of the merger or consolidation, any stockholder shall have the right to withdraw such stockholder’s demand for appraisal and to accept the terms offered upon the merger or consolidation. Within 120 days after the effective date of the

merger or consolidation, any stockholder who has complied with the requirements of subsections (a) and (d) hereof, upon written request, shall be entitled to receive from the corporation surviving the merger or resulting from the consolidation a statement setting forth the aggregate number of shares not voted in favor of the merger or consolidation and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. Such written statement shall be mailed to the stockholder within 10 days after such stockholder’s written request for such a statement is received by the surviving or resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under subsection (d) hereof, whichever is later.

(f) Upon the filing of any such petition by a stockholder, service of a copy thereof shall be made upon the surviving or resulting corporation, which shall within 20 days after such service file in the office of the Register in Chancery in which the petition was filed a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by the surviving or resulting corporation. If the petition shall be filed by the surviving or resulting corporation, the petition shall be accompanied by such a duly verified list. The Register in Chancery, if so ordered by the Court, shall give notice of the time and place fixed for the hearing of such petition by registered or certified mail to the surviving or resulting corporation and to the stockholders shown on the list at the addresses therein stated. Such notice shall also be given by 1 or more publications at least 1 week before the day of the hearing, in a newspaper of general circulation published in the City of Wilmington, Delaware or such publication as the Court deems advisable. The forms of the notices by mail and by publication shall be approved by the Court, and the costs thereof shall be borne by the surviving or resulting corporation.

(g) At the hearing on such petition, the Court shall determine the stockholders who have complied with this section and who have become entitled to appraisal rights. The Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to such stockholder.

(h) After determining the stockholders entitled to an appraisal, the Court shall appraise the shares, determining their fair value exclusive of any element of value arising from the accomplishment or expectation of the merger or consolidation, together with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value, the Court shall take into account all relevant factors. In determining the fair rate of interest, the Court may consider all relevant factors, including the rate of interest which the surviving or resulting corporation would have had to pay to borrow money during the pendency of the proceeding. Upon application by the surviving or resulting corporation or by any stockholder entitled to participate in the appraisal proceeding, the Court may, in its discretion, permit discovery or other pretrial proceedings and may proceed to trial upon the appraisal prior to the final determination of the stockholder entitled to an appraisal. Any stockholder whose name appears on the list filed by the surviving or resulting corporation pursuant to subsection (f) of this section and who has submitted such stockholder’s certificates of stock to the Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal rights under this section.

(i) The Court shall direct the payment of the fair value of the shares, together with interest, if any, by the surviving or resulting corporation to the stockholders entitled thereto. Interest may be simple or compound, as the Court may direct. Payment shall be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and the case of holders of shares represented by certificates upon the surrender to the corporation of the certificates representing such stock. The Court’s decree may be enforced as other decrees in the Court of Chancery may be enforced, whether such surviving or resulting corporation be a corporation of this State or of any state.

(j) The costs of the proceeding may be determined by the Court and taxed upon the parties as the Court deems equitable in the circumstances. Upon application of a stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorney’s fees and the fees and expenses of experts, to be charged pro rata against the value of all the shares entitled to an appraisal.

(k) From and after the effective date of the merger or consolidation, no stockholder who has demanded appraisal rights as provided in subsection (d) of this section shall be entitled to vote such stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record at a date which is prior to the effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be filed within the time provided in subsection (e) of this section, or if such stockholder shall deliver to the surviving or resulting corporation a written withdrawal of such stockholder’s demand for an appraisal and an acceptance of the merger or consolidation, either within 60 days after the effective date of the merger or consolidation as provided in subsection (e) of this section or thereafter with the written approval of the corporation, then the right of such stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed as to any stockholder without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just.

(l) The shares of the surviving or resulting corporation to which the shares of such objecting stockholders would have been converted had they assented to the merger or consolidation shall have the status of authorized and unissued shares of the surviving or resulting corporation.

APPENDIX E

CRYPTOMETRICS, INC.

EMPLOYMENT AGREEMENT

This Agreement is made as of the 1st day of May, 2005 by and between Cryptometrics, Inc. (the “Company”), and (the “Executive”).

1. Duties and Scope of Employment.

(a) Positions; Duties. During the Employment Term (as defined in Section 2), the Company shall employ Executive as Co-Chief Executive Officer (“Co-CEO”) of the Company. Executive shall report solely and directly to the Board of Directors of the Company (the “Board”) and consult with any other person employed by the Company as a co-chief executor officer. All other employees of the Company, other than the other Co-CEO, if any, shall report to Executive, his Co-CEO or his designee and not directly to the Board. During the Employment Term, Executive shall have such responsibilities, duties and authorities as are commensurate with those of chief executive officers of public entities of similar size, in particular, shall be, in addition to being responsible for the operations of the Company, the chief or Co-Chief external representative of the Company. The role and responsibilities of the Chairman of the Company shall be limited to chairing or co-chairing the Board and mentoring and counseling the Chief or Co-Chief Executive Officer when and as requested by him and such other matters as the Chairman and Executive may agree, and within thirty (30) days after the Effective Date, the By-laws of the Company shall be amended accordingly. The Board shall, in good faith, consider Executive’s advice and recommendations, if any, in connection with any appointments or nominations to the Board. For so long as Executive remains Chief or Co-Chief Executive Officer of the Company, the Board will nominate Executive to the Board and, if elected, Executive shall serve in such capacity without additional consideration.

(b) Obligations. During the Employment Term, Executive shall devote substantially all of his business efforts and time to the Company. Executive agrees, during the Employment Term, not to actively engage in any other employment, occupation or consulting activity for any direct or indirect remuneration without the prior approval of the Board; provided, however, that Executive may (i) serve in any capacity with any professional, community, industry, civic, educational or charitable organization, (ii) serve as a member of corporate boards of directors on which Executive serves on the Effective Date and, with the consent of the Board (which consent shall not be unreasonably withheld or delayed), other corporate boards of directors and (iii) manage his and his family’s personal investments and legal affairs so long as such activities do not materially interfere with the discharge of Executive’s duties.

2. Employment Term. The Company hereby agrees to employ Executive and Executive hereby accepts employment hereunder, in accordance with the terms and conditions set forth herein, commencing on the Effective Date. The period of Executive’s employment hereunder is referred to herein as the “Employment Term.” Executive and the Company understand and acknowledge that Executive’s employment with the Company constitutes “at-will” employment. Subject to the Company’s obligation to provide severance benefits as specified herein, Executive and the Company acknowledge that this employment relationship may be terminated at any time, upon written notice to the other party, with or without Cause or Good Reason and for any or no cause or reason, at the option of either the Company or Executive.

3. Compensation/Benefits. During the Employment Term, the Company shall pay and provide Executive the following:

(a) Cash Compensation. As compensation for his services to the Company, Executive shall receive a base salary (“Base Salary”) and shall be eligible to receive additional variable compensation. As of the Effective Date, Executive’s annualized Base Salary shall be $175,000, and his annual variable compensation amount shall be targeted at no less than $350,000 (the “Target Bonus” which, together with the Base Salary, shall be referred to herein as “Target Pay”), with an opportunity to earn up to at least $656,250 in annual variable compensation. As compensation for his services to the Company commencing one calendar year after the Effective Date, Executive’s Base Salary shall be $225,000 and his annual variable compensation amount shall be targeted at no less than $450,000. For years commencing thereafter, Executive’s Base Salary and

Target Bonus shall be as set by the Board provided that same shall not be reduced below the amount set for the prior year.

(b) Equity Compensation. Stock Options. The Company shall grant to the Executive, as of the Effective Date, a non-qualified stock option (the “Stock Option”) to purchase a total of 325,000 shares of Company common stock, $.001 par value (the “Common Stock”), (or common stock of the type and number for which the shares of the Common Stock of the Company are exchanged or converted into, as required pursuant to Exhibit A hereto), at a per share of common stock exercise price equal to $1.00 per share. The Stock Option is for a term of 10 years (subject to earlier termination as provided herein.) In the case of termination by the Company without Cause, voluntary termination by Executive for Good Reason, death or a Disability Termination, the Stock Option and any other Company stock option then held by Executive shall remain exercisable (to the extent vested on the date of termination) until the earlier of one year from the employment termination date or the expiration of the option. Subject to accelerated vesting as set forth in this Agreement, the Stock Option shall vest and become exercisable as to 25% of the shares originally subject to the Stock Option on each anniversary of the Effective Date, so as to be 100% vested on the four year anniversary thereof, conditioned upon Executive’s continued employment with the Company as of each vesting date. The Stock Option shall in all respects be subject to the terms, definitions and provisions of the attached form of stock option agreement, a copy of which has been given to Executive, as modified by the terms of this Agreement. The Stock Option Agreement shall be insubstantially in the form of Exhibit A hereto.

In the event of changes in the Common Stock of the Company occurring on or before the Effective Date but after the date of this Agreement by reason of stock dividends, slit-ups, recapitalizations, mergers, consolidations, combinations or exchanges of shares, separations, reorganizations or liquidations, the number and type of shares subject to the Stock Option and the purchase price per share shall be proportionally adjusted as set form in subsection 3(b) hereof.

When Executive incurs tax liability in connection with the exercise of the Stock Option or options, Executive may elect to satisfy his resulting withholding tax obligation by having the Company retain shares of Common Stock having a fair market value equal to the Company’s minimum withholding tax obligation.

At all times after the Effective Date, the Company shall maintain registrations on Form S-8 or another applicable form so that the Common Stock issued upon exercise of the Stock Option or other options or other equity awards are immediately saleable by Executive on the public market (subject to the non-registration limitations of applicable laws).

(c) Employee Benefits. Executive shall, to the extent eligible, be entitled to participate at a level commensurate with his position in all employee benefit welfare and retirement plans and programs, as well as equity plans, provided by the Company to its senior executives in accordance with the terms thereof as in effect from time to time.

(d) Perquisites. The Company shall provide to Executive, at the Company’s cost, all perquisites which other senior executives of the Company are entitled to receive and such other perquisites which are suitable to the character of Executive’s position with the Company and adequate for the performance of his duties hereunder.

(e) Business and Entertainment Expenses. Upon submission of appropriate documentation in accordance with its policies in effect from time to time, the Company shall pay or reimburse Executive for all business expenses which Executive incurs in performing his duties under this Agreement, including, but not limited to, travel, entertainment, professional dues and subscriptions, and all dues, fees, and expenses associated with membership in various professional, business, and civic associations and societies in which Executive participates in accordance with the Company’s policies in effect from time to time.

(f) Flexible Time Off. Executive shall be entitled to paid time off in accordance with the standard written policies of the Company with regard to senior executives, but in no event less than twenty-five (25) days, per calendar year.

4. Termination of Employment.

(a) Death or Disability. The Company may terminate Executive’s employment for disability in the event Executive has been unable to perform his material duties hereunder for six (6) consecutive months because of physical or mental incapacity by giving Executive notice of such termination while such continuing incapacity continues (a “Disability Termination”). Executive’s employment shall automatically terminate on Executive’s death. In the event Executive’s employment with the Company terminates during the Employment Term by reason of Executive’s death or a Disability Termination, then upon the date of such termination, (i) the Stock Option and all other stock option or equity grants to Executive shall vest in full so as to become fully exercisable, (ii) the Company shall promptly pay and provide Executive (or in the event of Executive’s death, Executive’s estate) (A) any unpaid Base Salary through the date of termination and any accrued vacation, (B) any unpaid bonus accrued with respect to the fiscal year ending on or preceding the date of termination, (C) reimbursement for any unreimbursed expenses incurred through the date of termination and (D) all other payments, benefits or fringe benefits to which Executive may be entitled subject to and in accordance with, the terms of any applicable compensation arrangement or benefit, equity or fringe benefit plan or program or grant and amounts which may become due under Sections 6, 9 and 10 hereof (collectively, items under (ii) are referred to as “Accrued Benefits”), and (iii) the Company shall pay to Executive at the time other senior executives are paid under any Variable Pay Plan or cash bonus or long term incentive plan, a pro- rata bonus equal to the amount Executive would have received if employment continued (without any discretionary cutback) multiplied by a fraction where the numerator is the number of days in each respective bonus period prior to Executive’s termination and the denominator is the number of days in the bonus period (the “Prorated Bonus”).

(b) Termination for Cause. The Company may terminate Executive’s employment for Cause. In the event that Executive’s employment with the Company is terminated during the Employment Term by the Company for Cause, Executive shall not be entitled to any additional payments or benefits hereunder, other than Accrued Benefits (including, but not limited to, any then vested Stock Option, or other stock options or equity grants). For the purposes of this Agreement, “Cause” shall mean (i) the willful failure by Executive to attempt to substantially perform his duties with the Company (other than any such failure resulting from his incapacity due to physical or mental impairment), unless any such failure is corrected within thirty (30) days following written notice by the Board that specifically identifies the manner in which the Board believes Executive has substantially not attempted to materially perform his duties or (ii) the willful gross misconduct by Executive with regard to the Company that is materially injurious to the Company. No act, or failure to act, by Executive shall be “willful” unless committed without good faith and without a reasonable belief that the act or omission was in the best interest of the Company. No event shall be deemed the basis for Cause unless Executive is terminated therefor within sixty (60) days after such event is known to the Executive’s Co-CEO, or, if there is no Co-CEO, known to the Chairman of any committee of or of the Board.

Notwithstanding the foregoing, Executive shall not be deemed to have been terminated for Cause without (i) advance written notice provided to Executive not less than fourteen (14) days prior to the date of termination setting forth the Company’s intention to consider terminating Executive and including a statement of the proposed date of termination and the specific detailed basis for such consideration of termination for Cause, (ii) an opportunity of Executive, together with his counsel, to be heard before the Board at least ten (10) days after the giving of such notice and prior to the proposed date of termination, (iii) a duly adopted resolution of the Board stating that in accordance with the provisions of the next to the last sentence of this paragraph (b), that the actions of Executive constituted Cause and the basis thereof, and (iv) a written determination provided by the Board setting forth the acts and omissions that form the basis of such termination of employment. Any determination by the Board hereunder shall be made by the affirmative vote of at least a two-thirds (2/3) majority of all of the members of the Board (other than Executive). Any purported termination of employment of Executive by the Company which does not meet each and every substantive and procedural requirement of this paragraph (b) shall be treated for all purposes under this Agreement as a termination of employment without Cause.

(c) Voluntary Termination for Good Reason; Involuntary Termination Other Than for Cause. Executive may terminate his employment for Good Reason at any time within one hundred eighty (180) days after the occurrence of the Good Reason event by written notice to the Company. If Executive’s employment with the Company is voluntarily terminated by Executive for “Good Reason” or is involuntarily terminated by the Company other than

for “Cause”, then, subject to Executive executing and not revoking the Release Agreement attached hereto as Exhibit B (other than with respect to subsections 4(c)(i) and (vii) below), the Company shall pay or provide Executive with the following:

(i) any Accrued Benefits;

(ii) the Prorated Bonus;

(iii) a severance amount equal to two (2) times Executive’s then Target Pay, payable in substantially equal installments over 24 months in accordance with the Company’s standard payroll practice; provided, however, that (i) if Executive competes with the Company or materially violates Sections 7(c) or (d) hereof, any severance payments due thereafter shall cease and be forfeited as of the commencement of such competition, (ii) in the event of a Change of Control after such termination, the unpaid portion of such severance amount, if any, shall be paid to Executive in full in a single lump sum cash payment within fifteen (15) business days following such Change of Control, and (iii) if such termination occurs in contemplation of, at the time of, or within two (2) years after a Change of Control, Executive shall instead be entitled to a lump sum cash payment within fifteen (15) business days after delivery of the aforesaid release equal to three (3) times the sum of (A) Executive’s then Base Salary and (B) the higher of (x) Executive’s then current Target Pay and (y) the highest variable pay and annual incentive bonus received by Executive for the two (2) fiscal years last ending prior to such termination. For purposes of this Section 4(c)(iii), “competition” shall mean engaging in any business that materially competes with the Company.

(iv) to the extent eligible on the date of termination, continued participation, at no additional after tax cost to Executive than Executive would have as an employee, in all welfare plans until two (2) years after the date of termination; provided, however, that if such termination occurs within two (2) years after a Change of Control, Executive shall be entitled to continued participation in all welfare plans for three (3) years rather than two (2) years. In the event Executive obtains other employment that offers substantially similar or improved benefits, as to any particular welfare plan, such continuation of coverage by the Company for such benefits under such plan shall immediately cease. To the extent such coverage cannot be provided under the Company’s welfare benefit plans without jeopardizing the tax status of such plans, for underwriting reasons or because of the tax impact on Executive, the Company shall pay Executive an amount such that Executive can purchase such benefits separately at no greater after tax cost to Executive than Executive would have had if the benefits were provided to Executive as an employee; (v) in the event such termination occurs in contemplation of, at the time of, or within two (2) years after a Change of Control, three (3) additional years of service and compensation credit (at Executive’s then compensation level) for benefit purposes under any defined benefit type retirement plan, including but not limited to any tax-qualified retirement plan and any excess benefit retirement plan if then in effect, and, if Executive is not eligible to receive benefits under any such plan on the date of termination, two (2) additional years of age for determining eligibility to receive such benefits, provided that benefits under any such plan will not commence until Executive actually attains the required distribution age under the plan or Executive’s spouse qualifies for death benefits under such plan and further provided that, with regard to any plan qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended (the “Code”), the additional amounts may be provided on a nonqualified plan basis.

(vi) full vesting of 50% of Executive’s unvested Stock Option and each traunche of each other grant of stock options or other equity awards, provided that if such termination takes place in contemplation of, at the time of, or within two (2) years after a Change of Control, Executive shall be entitled to full vesting of the Stock Option and all other stock options and equity awards;

(vii) outplacement services at a level commensurate with Executive’s position, including use of an executive office and secretary, for a period of one (1) year commencing on Executive’s date of termination but in no event extending beyond the date on which Executive commences other full time employment.

For the purposes of this Agreement “Good Reason” means, without the express written consent of Executive, the occurrence of any of the following events: (i) any reduction or diminution (except temporarily during any period of disability) in Executive’s titles or positions, any material diminution in Executive’s authority, duties or responsibilities with the Company (it being acknowledged that, in the event any entity becomes the owner

(directly or indirectly) of more than 35% of the Common Stock, it shall be Good Reason if Executive is not the Chief or Co-Chief Executive Officer of such entity); (ii) a breach by the Company of any material provision of this Agreement, including, but not limited to, a breach of the Company’s obligation under Section 1(a), any reduction, (other than a reduction (not to exceed ten percent (10%)) that applies, in equal percentages, to all U.S. officers (within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended) of the Company), in Executive’s Base Salary or any material failure to timely pay any part of Executive’s compensation (including, without limitation, Base Salary, annualized Target Pay and bonus) or to materially provide in the aggregate the level of benefits contemplated herein; (iii) the failure of the Company to obtain and deliver to Executive a satisfactory written agreement from any successor to the Company to assume and agree to perform this Agreement in accordance with Section 8 hereof; or (iv) the removal of Executive from the Board or the failure to elect him thereto when the Board is subsequently subject to re-election.

(d) Without Good Reason. Executive may terminate his employment at any time without Good Reason by written notice to the Company. In the event that Executive’s employment with the Company is terminated during the Employment Term by Executive without Good Reason, Executive shall not be entitled to any additional payments or benefits hereunder, other than Accrued Benefits (including, but not limited to, any then vested Stock Option or other stock options or equity grants).

(e) No Mitigation/No Offset. Executive shall not be required to seek other employment or otherwise mitigate the value of any severance benefits contemplated by this Agreement, nor shall any such benefits be reduced by any earnings or benefits that Executive may receive from any other source. The amounts payable hereunder shall not be subject to setoff, counterclaim, recoupment, defense or other right which the Company may have against Executive or others.

5. Change of Control Vesting Acceleration. In the event of a “Change of “Control” (as defined below), on the date of such Change of Control 50% of any remaining unvested shares subject to the Stock Option and of each tranche of each other stock option or equity award shall be immediately vested. Following such partial acceleration of the Stock Option or each tranche of each other stock option or equity award, the remaining unvested shares of such Stock Option or tranche shall continue to vest as otherwise provided in the grant.

For the purposes of this Agreement, “Change of Control” is defined as:

(a) Any “person”, other than one of the current Co-CEO’s of the Company (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 35% or more of the total voting power represented by the Company’s then outstanding voting securities; or

(b) A change in the composition of the Board occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” shall mean directors who either (i) are directors of the Company as of the date hereof or (ii) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or

(c) The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 50% of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or

(d) The consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets; or

(e) The approval by the stockholders of the Company of a plan of complete liquidation of the Company.

6. Golden Parachute Excise Tax Gross-Up.

(a) In the event that Executive shall become entitled to payments and/or benefits provided by this Agreement or any other amounts in the “nature of compensation” (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any person whose actions result in a change of ownership or effective control covered by Section 280G(b)(2) of the Code or any person affiliated with the Company or such person) as a result of such change in ownership or effective control (collectively the “Company Payments”), and such Company Payments will be subject to the tax (the “Excise Tax”) imposed by Section 4999 of the Code (and any similar tax that may hereafter be imposed by any taxing authority) the Company shall pay to Executive at the time specified in paragraph (d) below an additional amount (the “Gross-up Payment”) such that the net amount retained by Executive, after deduction of any Excise Tax on the Company Payments and any U.S. federal, state, and/or local income or payroll tax upon the Gross-up Payment provided for by this paragraph (a), but before deduction for any U.S. federal, state, and local income or payroll tax on the Company Payments, shall be equal to the Company Payments.

(b) For purposes of determining whether any of the Company Payments and Gross-up Payments (collectively the “Total Payments”) will be subject to the Excise Tax and the amount of such Excise Tax, (i) the Total Payments shall be treated as “parachute payments” within the meaning of Section 280G(b)(2) of the Code, and all “parachute payments” in excess of the “base amount” (as defined under Section 280G(b)(3) of the Code) shall be treated as subject to the Excise Tax, unless and except to the extent that, in the opinion of the Company’s independent certified public accountants appointed prior to any change in ownership (as defined under Section 280G(b)(2) of the Code) or tax counsel selected by such accountants (the “Accountants”) such Total Payments (in whole or in part) either do not constitute “parachute payments,” represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the “base amount” or are otherwise not subject to the Excise Tax, and (ii) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Accountants in accordance with the principles of Section 280G of the Code.

(c) For purposes of determining the amount of the Gross-up Payment, Executive shall be deemed to pay U.S. federal income taxes at the highest marginal rate of U.S. federal income taxation in the calendar year in which the Gross-up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of Executive’s residence for the calendar year in which the Company Payment is to be made, net of the maximum reduction in U.S. federal income taxes which could be obtained from deduction of such state and local taxes if paid in such year. In the event that the Excise Tax is subsequently determined by the Accountants to be less than the amount taken into account hereunder at the time the Gross-up Payment is made, Executive shall repay to the Company, at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the prior Gross-up Payment attributable to such reduction (plus the portion of the Gross-up Payment attributable to the Excise Tax and U.S. federal, state and local income tax imposed on the portion of the Gross-up Payment being repaid by Executive if such repayment results in a reduction in Excise Tax or a U.S. federal, state and local income tax deduction), plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in the event any portion of the Gross-up Payment to be refunded to the Company has been paid to any U.S. federal, state and local tax authority, repayment thereof (and related amounts) shall not be required until actual refund or credit of such portion has been made to Executive, and interest payable to the Company shall not exceed the interest received or credited to Executive by such tax authority for the period it held such portion. Executive and the Company shall mutually agree upon the course of action to be pursued (and the method of allocating the expense thereof) if Executive’s claim for refund or credit is denied.

In the event that the Excise Tax is later determined by the Accountant or the Internal Revenue Service to exceed the amount taken into account hereunder at the time the Gross-up Payment is made (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-up Payment), the Company shall make an additional Gross-up Payment in respect of such excess (plus any interest or penalties payable with respect to such excess) at the time that the amount of such excess is finally determined.

(d) The Gross-up Payment or portion thereof provided for in paragraph (c) above shall be paid not later than the thirtieth (30th) day following an event occurring which subjects Executive to the Excise Tax; provided, however, that if the amount of such Gross-up Payment or portion thereof cannot be finally determined on or before such day,

the Company shall pay to Executive on such day an estimate, as determined in good faith by the Accountant, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code), subject to further payments pursuant to paragraph (c) hereof, as soon as the amount thereof can reasonably be determined, but in no event later than the ninetieth (90th) day after the occurrence of the event subjecting Executive to the Excise Tax. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to Executive, payable on the fifth (5th) day after demand by the Company (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code).

(e) In the event of any controversy with the Internal Revenue Service (or other taxing authority) with regard to the Excise Tax, Executive shall permit the Company to control issues related to the Excise Tax (at its expense), provided that such issues do not potentially materially adversely affect Executive, but Executive shall control any other issues. In the event the issues are interrelated, Executive and the Company shall in good faith cooperate so as not to jeopardize resolution of either issue, but if the parties cannot agree Executive shall make the final determination with regard to the issues. In the event of any conference with any taxing authority as to the Excise Tax or associated income taxes, Executive shall permit the representative of the Company to accompany Executive, and Executive and Executive’s representative shall cooperate with the Company and its representative.

(f) The Company shall be responsible for all charges of the Accountant.

(g) The Company and Executive shall promptly deliver to each other copies of any written communications, and summaries of any verbal communications, with any taxing authority regarding the Excise Tax covered by this Section 6.

7. Non-Compete; Non-Solicit.

(a) The parties hereto recognize that Executive’s services are special and unique and that the level of compensation and the provisions herein for compensation under Section 3 are partly in consideration of and conditioned upon Executive’s not competing with the Company, and that Executive’s covenant not to compete or solicit as set forth in this Section 7 during and after employment is essential to protect the business and good will of the Company.

(b) Executive agrees that during the term of employment with the Company and for a period of twenty-four (24) months thereafter (the “Covenant Period”), Executive shall not render services for any of the up to three (3) organizations designated by the Board in a writing delivered to Executive within thirty (30) days after the Effective Date (the “Prohibited List”). The Prohibited List may be changed by the Board from time to time (but there may never be more than three (3) entities listed) by written notice to Executive, such notice to be effective only if Executive’s commencement of rendering services for such entity is ninety (90) or more days after the giving of such notice. The scope of the non-competition clause under any equity plan, benefit plan or other plan, agreement or arrangement of the Company shall not be deemed to prohibit Executive’s actions or, except as provided in Section 4(c) of this Agreement or pursuant to a provision in a Company plan or grant agreement that precludes future vesting or exercisability at the time competition is entered into, serve as a basis for any reduction or forfeiture of benefits or payments thereunder unless such actions violate this Section 7(b) of this Agreement.

(c) During the Covenant Period, Executive shall not, directly or indirectly, disrupt, damage or interfere with the operation or business of the Company by soliciting or recruiting its employees for Executive or others, but the foregoing shall not prevent Executive from giving references.

(d) Executive agrees that the Company would suffer an irreparable injury if Executive was to breach the covenants contained in Sections 7(b) or (c) and that the Company would by reason of such breach or threatened breach be entitled to injunctive relief in a court of competent jurisdiction and Executive hereby stipulates to the entering of such injunctive relief prohibiting Executive from engaging in such breach.

(e) If any of the restrictions contained in this Section 7 shall be deemed to be unenforceable by reason of the extent, duration or geographical scope or other provisions thereof, then the parties hereto contemplate that the court shall reduce such extent, duration, geographical scope or other provision hereof and enforce this Section 7 in its reduced form for all purposes in the manner contemplated hereby.

8. Assignment. This Agreement shall be binding upon and inure to the benefit of (a) the heirs, beneficiaries, executors and legal representatives of Executive upon Executive’s death and (b) any successor of the Company, provided that any successor shall within ten (10) days of such assumption deliver to Executive a written assumption in a form reasonably acceptable to Executive. Any such successor of the Company shall be deemed substituted for the Company under the terms of this Agreement for all purposes. As used herein, “successor” shall mean any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company. Notwithstanding such assignment, the Company shall remain, with such successor, jointly and severally liable for all of its obligations hereunder. This Agreement may not otherwise be assigned by the Company.

None of the rights of Executive to receive any form of compensation payable pursuant to this Agreement shall be assignable or transferable except through a testamentary disposition or by the laws of descent and distribution upon the death of Executive or as provided in Section 18 hereof. Any attempted assignment, transfer, conveyance or other disposition (other than as aforesaid) of any interest in the rights of Executive to receive any form of compensation hereunder shall be null and void; provided, however, that notwithstanding the foregoing, Executive shall be allowed to transfer vested shares subject to the Stock Option or other stock options or equity awards and vested Restricted Stock consistent with the rules for transfers to “family members” as defined in Securities Act Form S-8.

9. Liability Insurance.

(a) The Company shall cover Executive under directors and officers liability insurance both during and, while potential liability exists, after the Employment Term in the same amount and to the same extent, if any, as the Company covers its other officers and directors.

(b) The Company shall during and after the Employment Term indemnify and hold harmless Executive to the fullest extent permitted by applicable law with regard to actions or inactions taken by Executive in the performance of his duties as an officer, director and employee of the Company and its affiliates or as a fiduciary of any benefit plan of the Company and its affiliates.

10. Payment of Legal Fees. The Company shall pay Executive’s reasonable legal and financial consulting fees and costs associated with entering into this Agreement.

11. Notices. All notices, requests, demands and other communications called for hereunder shall be in writing and shall be deemed given if (a) delivered personally or by facsimile, (b) one (1) day after being sent by Federal Express or a similar commercial overnight service, or (c) three (3) days after being mailed by registered or certified mail, return receipt requested, prepaid and addressed to the parties or their successors in interest at the following addresses, or at such other addresses as the parties may designate by written notice in the manner aforesaid:

If to the Company:

Cryptometrics, Inc.
199 Read Avenue
Crestwood, NY 10707
Attn: Co-CEO other than Executives

If to Executive:

at the last residential address known by
the Company.

12. Severability. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision.

13. Entire Agreement. This Agreement represents the entire agreement and understanding between the Company and Executive concerning Executive’s employment relationship with the Company, and supersedes and replaces any and all prior agreements and understandings concerning Executive’s employment relationship with the

Company entered into prior to the date hereof but not any written agreements entered into simultaneous with this Agreement or thereafter.

14. Arbitration.

(a) Agreement. The Company and Executive agree that any dispute or controversy arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach, or termination thereof shall be settled by binding arbitration to be held in White Plains, New York or such other location agreed by the parties hereto, in accordance with the National Rules for the Resolution of Employment Disputes then in effect of the American Arbitration Association. The arbitrator may grant injunctions or other relief in such dispute or controversy. The decision of the arbitrator shall be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator’s decision in any court having jurisdiction.

(b) Governing Law. The arbitrators shall apply New York law to the merits of dispute or claim, without reference to rules of conflicts of law. Executive and the Company hereby expressly consent to the personal jurisdiction of the state and federal courts located in New York for any action or proceeding arising from or relating to this Agreement or relating to any arbitration in which the parties are participants.

(c) Costs and Fees of Arbitration. Executive shall pay the initial arbitration filing fee (not to exceed $200), and the Company shall pay the remaining costs and expenses of such arbitration (unless Executive requests that each party pay one-half of the costs and expenses of such arbitration or unless otherwise required by law). Unless otherwise required by law or pursuant to an award by the arbitrator, the Company and Executive shall each pay separately its or his counsel fees and expenses. Notwithstanding the foregoing, the arbitrator may, but need not, award the prevailing party in any dispute its or his legal fees and expenses.

16. No Oral Modification, Cancellation or Discharge. This Agreement may only be amended, canceled or discharged in writing signed by Executive and an executive officer of the Company.

17. Survivorship. The respective rights and obligations of Company and Executive hereunder shall survive any termination of Executive’s employment hereunder to the extent necessary for the preservation of such rights and obligations.

18. Beneficiaries. Executive shall be entitled, to the extent permitted under any applicable law, to select and change the beneficiary or beneficiaries to receive any compensation or benefit payable hereunder upon his death by giving the Company written notice thereof. If Executive dies, severance then due or other amounts due hereunder shall be paid to his designated beneficiary or beneficiaries or, if none are designated or none survive Executive, his estate.

19. Withholding. The Company shall be entitled to withhold, or cause to be withheld, any amount of federal, state, city or other withholding taxes required by law with respect to payments made to Executive in connection with his employment hereunder.

20. Governing Law. This Agreement shall be governed by the laws of the State of New York, without reference to rules of conflicts of law.

21. Effective Date. This Agreement is effective on the earlier to occur of the date on which a public offering for cash of the common stock of the Company (other than an offering of common stock pursuant to a stock option plan for the benefit of the employees of the Company) registered pursuant to the Securities Act of 1933, as amended, and the regulations thereunder closes or the closing date of a transaction in which the Company merges into or consolidates with another company and the Common Stock of the Company is exchanged for the common stock of another company which is registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended. The date on which this Agreement is effective is referred to herein as the “Effective Date”. This Agreement shall be null and void if the Effective Date shall not have occurred on or before September 30, 2011.

22. Counterparts. This Agreement may be executed in counterparts, and each counterpart when so executed shall have the same force and effect as an original and shall constitute an effective, binding agreement on the part of each of the undersigned, and such counterparts together will constitute one instrument.

EXHIBIT A

OPTION AGREEMENT

Option Agreement dated , 200 between , an individual person having an address at , (the “Optionee”) and Cryptometrics, Inc., a Delaware corporation having an address at 199 Read Avenue, Crestwood, New York 10707 (the “Grantor”).

For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Grantor desires to grant to Optionee the right to purchase up to an aggregate of 325,000 shares (the “Option Shares”) of the Common Stock of Cryptometrics, Inc., a Delaware corporation, par value $.001 per share (the “Stock”) on the terms and conditions hereinafter provided.

NOW, THEREFORE, the parties hereto agree as follows:

1. Grant of Option: The Grantor hereby grants to the Optionee the option to purchase up to an aggregate of 325,000 shares (the “Option Shares”) of the Stock (such number being subject to adjustment as provided in paragraph 5 hereof) on the terms and conditions set forth herein (the “Option”).

2. Exerciseability of the Option. Subject to accelerated vesting as set forth in the Employment Agreement between the Grantor and the Grantee made as of the first day of May, 2005 (the “Employment Agreement”), the Stock Option shall vest as to 25% of the shares originally subject to it on each anniversary of the date of this Stock Option Agreement, so as to be 100% vested on the fourth anniversary thereof. Each such installment shall be cumulative, but each exercise must encompass at least one installment or 100 shares, whichever is less. In the event the Grantee’s exercise includes a fractional share, the Corporation will not be required to issue a fractional share but will pay the Grantee in cash the value of such fraction. All unexercised rights shall lapse and forever terminate after the expiration of ten years from the date of this Agreement. The Optionee or its designated successors or assigns may exercise the Option in whole or in part at any time after the date hereof during the term of the Option set forth in paragraph 2 hereof.

3. Term. Subject to earlier termination as set forth in the Employment Agreement, the unexercised portion of the Option shall automatically and without notice terminate and become null and void at 12:00 a.m. New York time on the tenth (10th) anniversary of the date hereof.

4. Purchase Price. The purchase price of the Option Shares shall be $.01 per share.

5. Adjustments Upon Changes in Capitalization. In the event of changes in the Stock by reason of stock dividends, split-ups, recapitalizations, mergers, consolidations, combinations or exchanges of shares, separations, reorganizations, or liquidation occurring after or as of the date hereof, the number of Option Shares and the purchase price for the Option Shares shall be proportionately adjusted.

6. Method of Exercising Option. Subject to the terms and conditions of this option Agreement, the Option may be exercised by written notice to the Grantor, at its address stated above or such other location as may, from time to time, be designated by the Grantor by written notice to Optionee. Such notice of exercise shall state the election to exercise the Option and the number of Option Shares that are being purchased pursuant to the Option, the Optionee’s address and shall be signed by the Optionee. Such notice shall be accompanied by payment of the full purchase price of such Option Shares. Payment of such purchase price shall be made by check payable to the order of the Grantor. The Grantor shall deliver a certificate, or certificates, representing such Option Shares promptly after the notice of exercise and payment shall have been received.

7. Binding Effect. This instrument shall be binding upon and inure to the benefit of the parties and their respective successors and assigns.

EXHIBIT B

RELEASE OF CLAIMS AGREEMENT

This Release of Claims Agreement (“Agreement”) is made by and between Cryptometrics, Inc. (the “Company”) and (“Executive”).

WHEREAS, was employed by the Company;

WHEREAS, the Company and Executive have entered into an Employment Agreement made as of May 1, 2005 (the “Employment Agreement”).

NOW THEREFORE, in consideration of the mutual promises made herein, the Company and Executive (collectively referred to as “the Parties”) hereby agree as follows:

1. Termination. Executive’s employment from the Company terminated on .

2. Consideration. Subject to and in consideration of Executive’s release of claims as provided herein, the Company has agreed to pay Executive certain benefits as set forth in the Employment Agreement.

3. Payment of Salary. Executive acknowledges and represents that the Company has paid all salary, wages, bonuses, accrued vacation, commissions and any and all other benefits due to Executive, except .

4. Release of Claims. Executive agrees that the foregoing consideration represents settlement in full of all outstanding obligations owed to Executive by the Company. Executive, on behalf of himself, and his respective heirs, family members, executors and assigns, hereby fully and forever releases the Company and its past, present and future officers, agents, directors, Executives, investors, shareholders, administrators, affiliates, divisions, subsidiaries, parents, predecessor and successor corporations, and assigns, from, and agrees not to sue or otherwise institute or cause to be instituted any legal or administrative proceedings concerning any claim, duty, obligation or cause of action relating to any matters of any kind, whether presently known or unknown suspected or unsuspected, that he may possess arising from any omissions, acts or facts that have occurred up until and including the Effective Date of this Agreement including, without limitation,

(a) any and all claims relating to or arising from Executive’s employment relationship with the Company and the termination of that relationship;

(b) any and all claims relating to, or arising from, Executive’s right to purchase, or actual purchase of shares of stock of the Company, including, without limitation, any claims for fraud, misrepresentation, breach of fiduciary duty, breach of duty under applicable state corporate law, and securities fraud under any state of federal law:

(c) any and all claims for wrongful discharge of employment; termination in violation of public policy; discrimination; breach of contract, both express and implied; breach of a covenant of good faith and fair dealing, both express and implied; promissory estoppel; negligent or intentional infliction of emotional distress; negligent or intentional misrepresentation; negligent or intentional interference with contract or prospective economic advantage; unfair business practices; defamation; libel; slander; negligence; personal injury; assault; battery; invasion of privacy; false imprisonment; and conversion;

(d) any and all claims for violation of any federal, state or municipal statute, including, but not limited to, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act of 1990, the Fair Labor Standards Act, the Executive Retirement Income Security Act of 1974, The Worker Adjustment and Retraining Notification Act, the California Fair Employment and Housing Act, and Labor Code section 201, et seq. and section 970, et seq. and all amendments to each such Act as well as the regulations issued thereunder;

(e) any and all claims for violation of the federal, or any state, constitution;

(f) any and all claims arising out of any other laws and regulations relating to employment or employment discrimination; and

(g) any and all claims for attorneys’ fees and costs.

Executive agrees that the release set forth in this section shall be remain in effect in all respects as a complete general release as to the matters released. This release does not extend to any obligations under the Employment Agreement that survive termination of Executive’s employment with the Company or any obligations incurred under this Agreement.

Notwithstanding the foregoing, this Release shall not cover Executive’s rights to payments and benefits under Section 4(c) of the Employment Agreement, Executive’s rights under Section 4(e), 6.9 or 14 of the Employment Agreement, Executive’s rights to indemnification under the By-laws or Certificate of Incorporation of the Company or any other rights to indemnification or Executive’s rights with regard to any equity or stock option granted or under any benefit plan.

5. Acknowledgement of Waiver of Claims under ADEA. Executive acknowledges that he is waiving and releasing any rights he may have under the Age Discrimination in Employment Act of 1967 (“ADEA”) and that this waiver and release is knowing and voluntary. Executive and the Company agree that this waiver and release does not apply to any rights or claims that may arise under the ADEA after the Effective Date of this Agreement. Executive acknowledges that the consideration given for this waiver and release Agreement is in addition to anything of value to which Executive was already entitled. Executive further acknowledges that he has been advised by this writing that (a) he should consult with an attorney prior to executing this Agreement; (b) he has at least twenty-one (21) days within which to consider this Agreement; (c) he has seven (7) days following the executing of this Agreement by the parties to revoke the Agreement; and (d) this Agreement shall not be effective until the revocation period has expired. Any revocation should be in writing and delivered to the Company at Cryptometrics, Inc., 199 Read Avenue, Valhalla, New York 10595, by close of business on the seventh day from the date that Executive signs this Agreement.

6. No Pending or Future Lawsuits. Executive represents that he has no lawsuits, claims, or actions pending in his name, or on behalf of any other person or entity, against the Company or any other person or entity referred to herein. Executive also represents that he does not intend to bring any claims on his own behalf or on behalf of any other person or entity against the Company or any other person or entity referred to herein with regard to matters released hereunder.

7. Costs. The Parties shall each bear their own costs, expert fees, attorneys’ fees and other fees incurred in connection with this Agreement.

8. Authority. Executive represents and warrants that he has the capacity to act on his own behalf and on behalf of all who might claim through him to bind them to the terms and conditions of this Agreement.

9. No Representations. Executive represents that he has had the opportunity to consult with an attorney, and has carefully read and understands the scope and effect of the provisions of this Agreement. Neither party has relied upon any representations or statements made by the other party hereto which are not specifically set forth in this Agreement.

10. Severability. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision.

11. Entire Agreement. This Agreement and the Employment Agreement and the agreements and plans referenced therein represent the entire agreement and understanding between the Company and Executive concerning Executive’s separation from the Company, and supersede and replace and all prior agreements and understandings concerning Executive’s relationship with the Company and his compensation by the Company. This Agreement may only be amended in writing signed by Executive and an executive officer of the Company.

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS


ITEM 20.	*INDEMNIFICATION OF DIRECTORS AND OFFICERS*

Section 78.751 of Chapter 78 of the Nevada Revised Statutes and JAG Media’s Bylaws contain provisions for indemnification of officers and directors of JAG Media and in certain cases employees and other persons. JAG Media’s Bylaws provide that JAG Media will indemnify any person who was or is a party or is threatened to be made a party to any proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of JAG Media) by reason of the fact that such person is or was a director, trustee, officer, employee or agent of JAG Media, or is or was serving at the request of JAG Media as a director, trustee, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgment, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of JAG Media, and with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful.

In accordance with JAG Media’s Bylaws, the termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, will not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of JAG Media, and with respect to any criminal action proceeding, had reasonable cause to believe that such person’s conduct was unlawful.

JAG Media’s Bylaws also provide that JAG Media will indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of JAG Media to procure a judgment in JAG Media’s favor by reason of the fact that such person is or was a director, trustee, officer, employee or agent of JAG Media, or is or was serving at the request of JAG Media as a director, trustee, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorney’s fees) and amount paid in settlement actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of JAG Media, and, with respect to amounts paid in settlement, the settlement of the suit or action was in the best interests of JAG Media. No indemnification will be made, however, in respect of any claim, issue or matter as to which such person has been adjudged to be liable for gross negligence or willful misconduct in the performance of such person’s duty to JAG Media unless and only to the extent that, the court in which such action or suit was brought determines upon application that, despite circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as such court deems proper. The termination of any action or suit by judgment or settlement will not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests JAG Media.

To the extent that a director, trustee, officer, employee or agent of JAG Media has been successful on the merits or otherwise, in whole or in part in defense of any action, suit or proceeding made by a third party or JAG Media, such person will be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with such claims.


ITEM 21.	*EXHIBITS AND FINANCIAL STATEMENT SCHEDULES*

(a) Exhibits


Exhibit			Description

	2	.1	Agreement and Plan of Reorganization dated March 16, 1999 between Professional Perceptions, Inc. (now known as JagNotes.com Inc.), Harold Kaufman, Jr., an officer, director and principal stockholder thereof, NewJag, Inc., and the stockholders of NewJag, Inc.(1)
	2	.2	Agreement and Plan of Merger dated as of July 29, 1999 by and among JagNotes, Inc., a New Jersey corporation, and JagNotes.com, Inc., a Nevada corporation(2)

II-1


Exhibit			Description

	3	.1	Composite Amended and Restated Articles of Incorporation of JAG Media Holdings, Inc.(18)
	3	.2	Bylaws of Registrant(2)
	3	.3	Amendment to Bylaws of Registrant(6)
	3	.4	Amendment to Bylaws of Registrant(12)
	4	.1	Form of Common Stock Certificate(15)
	4	.2	Form of Series 2 Class B Stock Certificate(15)
	4	.3	Promissory Note, dated January 25, 2005, by and between JAG Media Holdings, Inc. and YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP(11)
	4	.4	Letter Agreement, dated August 5, 2005, extending maturity date of Promissory Note dated January 25, 2005 by and between JAG Media Holdings, Inc. and YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP(14)
	4	.5	Securities Purchase Agreement, effective May 25, 2006, by and between JAG Media Holdings, Inc. and YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP(17)
	4	.6	$1,900,000 Secured Convertible Debenture issued to YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, effective May 25, 2006(17)
	4	.7	Security Agreement, effective May 25, 2006, by and between JAG Media Holdings, Inc. and YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP(17)
	4	.8	Security Agreement, effective May 25, 2006, by and between JAG Media LLC and YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP(17)
	4	.9	$1,250,000 Secured Convertible Debenture issued to YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, effective May 25, 2006(17)
	4	.10	Warrant No. CCP-1 for 2,000,000 shares of common stock issued to YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, effective May 25, 2006(17)
	4	.11	Warrant No. CCP-2 for 2,000,000 shares of common stock issued to YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, effective May 25, 2006(17)
	4	.12	Warrant No. CCP-3 for 2,000,000 shares of common stock issued to YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, effective May 25, 2006(17)
	4	.13	Warrant No. CCP-4 for 3,000,000 shares of common stock issued to YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, effective May 25, 2006(17)
	4	.14	Warrant No. CCP-5 for 3,000,000 shares of common stock issued to YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, effective May 25, 2006(17)
	4	.15	$1,000,000 Secured Convertible Debenture issued to YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, effective May 31, 2006(17)
	5	.1*	Opinion of Jones Vargas
	8	.1*	Tax Opinion of Morgan, Lewis & Bockius LLP
	10	.1	JAG Media Holdings, Inc. 1999 Long Term Incentive Plan, as amended(4)
	10	.2	Amended and Restated Employment Agreement, dated August 31, 2001, by and between Thomas J. Mazzarisi and Registrant(3)
	10	.3	Amended and Restated Employment Agreement, dated August 31, 2001, by and between Stephen J. Schoepfer and Registrant(3)
	10	.4	Amendment to Amended and Restated Employment Agreement, dated as of November 3, 2005, by and between Registrant and Thomas J. Mazzarisi(15)
	10	.5	Amendment to Amended and Restated Employment Agreement, dated as of November 3, 2005, by and between Registrant and Stephen J. Schoepfer(15)
	10	.6	Amendment to Amended and Restated Employment Agreement, dated as of November 12, 2007, by and between Registrant and Thomas J. Mazzarisi(29)
	10	.7	Amendment to Amended and Restated Employment Agreement, dated as of November 12, 2007, by and between Registrant and Stephen J. Schoepfer(29)

II-2


Exhibit			Description

	10	.8	Consulting Agreement, dated June 12, 2002, between JAG Media Holdings, Inc. and Walsh Organization, Inc.(8)
	10	.9	Power of Attorney and Contingent Fee Contract, dated June 14, 2002, among JAG Media Holdings, Inc., Gary Valinoti and the Law Firm of O’Quinn, Laminack & Pirtle(8)
	10	.10	Subscription Agreement, dated December 10, 2002, between JAG Media Holdings, Inc. and Bay Point Investment Partners LLC(5)
	10	.11	Placement Agent Agreement, dated December 10, 2002, between JAG Media Holdings, Inc. and RMC 1 Capital Markets, Inc.(5)
	10	.12	Placement Agent Agreement, dated as of June 19, 2003, between JAG Media Holdings, Inc. and RMC 1 Capital Markets, Inc., as amended on August 12, 2003(7)
	10	.13	Subscription Agreement, dated as of June 19, 2003, between JAG Media Holdings, Inc. and Bay Point Investment Partners LLC, as amended on August 12, 2003(7)
	10	.14	Subscription Agreement, dated as of September 25, 2003, between JAG Media Holdings, Inc. and Kuekenhof Equity Fund L.P.(8)
	10	.15	Non-Circumvention/Non-Disclosure Agreement, dated as of January 1, 2004 between Flow Capital Advisors Inc. and JAG Media Holdings, Inc.(26)
	10	.16	Finder’s Fee Agreement, dated as of January 5, 2004, between JAG Media Holdings, Inc. and Flow Capital Advisors, Inc.(9)
	10	.17	Business Sale Agreement dated November 24, 2004, by and among TComm Limited, TComm (UK) Limited and JAG Media Holdings, Inc.(10)
	10	.18	Employment Agreement, dated November 24, 2004, by and between JAG Media Holdings, Inc. and Stuart McClean(10)
	10	.19	Employment Agreement, dated November 24, 2004, by and between JAG Media Holdings, Inc. and Joanne McClean(10)
	10	.20	Finder’s Fee Agreement, dated as of March 14, 2005, by and between JAG Media Holdings, Inc. and Flow Capital Advisors, Inc.(26)
	10	.21	Company Voting and Lock Up Agreement dated as of December 27, 2005 by and among JAG Media Holdings, Inc., Robert Barra and Michael Vitale(16)
	10	.22	Letter Agreement, effective May 25, 2006, by and between JAG Media Holdings, Inc. and YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, converting $2,000,000 Promissory Note dated January 25, 2005, as amended August 5, 2005, made by JAG Media Holdings, Inc. for the benefit of Cornell Capital Partners, LP(17)
	10	.23	Investor Registration Rights Agreement, effective May 25, 2006, by and between JAG Media Holdings, Inc. and YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP(17)
	10	.24	Letter Agreement, effective May 25, 2006, by and between JAG Media Holdings, Inc. and Cornell Capital Partners, LP terminating Equity Line Agreement Purchase Agreement by and between JAG Media Holdings, Inc. and YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, dated as of April 9, 2002, as amended on July 8, 2004 and July 21, 2004(17)
	10	.25	Irrevocable Transfer Agent Instructions, effective May 25, 2006, by and among JAG Media Holdings, Inc., Transfer Online, Inc. and YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP(17)
	10	.26	Letter Agreement, dated January 24, 2007, by and among JAG Media Holdings, Inc., YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, Cryptometrics, Inc., Robert Barra and Michael Vitale(19)
	10	.27	Letter Agreement, dated February 26, 2007, by and among JAG Media Holdings, Inc., YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, Cryptometrics, Inc., Robert Barra and Michael Vitale(20)
	10	.28	Letter Agreement, dated April 2, 2007, by and among JAG Media Holdings, Inc., YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, Cryptometrics, Inc., Robert Barra and Michael Vitale(21)

II-3


Exhibit			Description

	10	.29	Letter Agreement, dated April 20, 2007, by and among JAG Media Holdings, Inc., YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, Cryptometrics, Inc., Robert Barra and Michael Vitale(22)
	10	.30	Letter Agreement, dated May 11, 2007, by and among JAG Media Holdings, Inc., YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, Cryptometrics, Inc., Robert Barra and Michael Vitale(23)
	10	.31	Letter Agreement, dated May 18, 2007, by and among JAG Media Holdings, Inc., YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, Cryptometrics, Inc., Robert Barra and Michael Vitale(24)
	10	.32	Letter Agreement, dated June 15, 2007, by and among JAG Media Holdings, Inc., YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, Cryptometrics, Inc., Robert Barra and Michael Vitale(25)
	10	.33	Letter Agreement, dated July 16, 2007, by and among JAG Media Holdings, Inc., YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, Cryptometrics, Inc., Robert Barra and Michael Vitale(26)
	10	.34	Letter Agreement, dated September 10, 2007, by and among JAG Media Holdings, Inc., YA Global Investments, L.P., Cryptometrics, Inc., Robert Barra and Michael Vitale(28)
	10	.35	Letter Agreement, dated November 7, 2007, by and among JAG Media Holdings, Inc., YA Global Investments, L.P., Cryptometrics, Inc., Robert Barra and Michael Vitale(29)
	10	.36	Letter Agreement, dated January 31, 2008, between JAG Media Holdings, Inc. and YA Global Investments, L.P.(30)
	21	.1	Subsidiaries of JAG Media(20)
	23	.1*	Consent of J.H. Cohn LLP
	23	.2*	Consent of Seligson & Giannattasio, LLP
	23	.3*	Consent of Jones Vargas (Included in Opinion of Jones Vargas)
	23	.4*	Consent of Morgan Lewis
	99	.1	Articles of Merger of JagNotes, Inc. into JagNotes.com, Inc. dated July 29, 1999 (including Certificate of Correction related thereto)(2)
	99	.2	Letter of Intent, dated September 9, 2005, by and among the Cryptometrics, Inc. and JAG Media Holdings, Inc.(13)
	99	.3	Agreement and Plan of Merger, dated as of December 27, 2005, by and among JAG Media Holdings, Inc., Cryptometrics Acquisition, Inc., Cryptometrics, Inc. and the stockholders named therein (16)
	99	.4	Letter Agreement, dated as of January 24, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Robert Barra, Michael Vitale, Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Thomas J. Mazzarisi and Stephen J. Schoepfer amending Agreement and Plan of Merger,(19)
	99	.5	Letter Agreement, dated as of February 26, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Robert Barra, Michael Vitale, Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Thomas J. Mazzarisi and Stephen J. Schoepfer amending Agreement and Plan of Merger(20)
	99	.6	Amendment to Merger Agreement, dated as of April 2, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Robert Barra, Michael Vitale, Thomas J. Mazzarisi and Stephen J. Schoepfer(21)
	99	.7	Amendment to Merger Agreement, dated as of April 20, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Robert Barra, Michael Vitale, Thomas J. Mazzarisi and Stephen J. Schoepfer(22)
	99	.8	Amendment to Merger Agreement, dated as of May 11, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Robert Barra, Michael Vitale, Thomas J. Mazzarisi and Stephen J. Schoepfer(23)
	99	.9	Amendment to Merger Agreement, dated as of May 18, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Robert Barra, Michael Vitale,Thomas J. Mazzarisi and Stephen J. Schoepfer(24)

II-4


Exhibit			Description

	99	.10	Amendment to Merger Agreement, dated June 15, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Robert Barra, Michael Vitale, Thomas J. Mazzarisi and Stephen J. Schoepfer(25)
	99	.11	Amendment to Merger Agreement, dated July 16, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Robert Barra, Michael Vitale, Thomas J. Mazzarisi and Stephen J. Schoepfer(26)
	99	.12	Amendment to Merger Agreement, dated August 16, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Robert Barra, Michael Vitale, Thomas J. Mazzarisi and Stephen J. Schoepfer(28)
	99	.13	Amendment to Merger Agreement, dated November 7, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Robert Barra, Michael Vitale, Thomas J. Mazzarisi and Stephen J. Schoepfer(29)
	99	.14	Amendment to Merger Agreement, dated February 6, 2008, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Robert Barra, Michael Vitale, Thomas J. Mazzarisi and Stephen J. Schoepfer(30)


*		Filed herewith.

(1)		Previously filed as an exhibit to our Registration Statement on Form SB-2 filed on July 30, 1999.

(2)		Previously filed as an exhibit to Amendment No. 1 to our Registration Statement on Form SB-2 filed on September 30, 1999.

(3)		Previously filed as an exhibit to Amendment No. 1 to our Registration Statement on Form SB-2 filed on September 26, 2001.

(4)		Previously filed as an exhibit to our Registration Statement on Form S-8 filed on May 1, 2002.

(5)		Previously filed as an exhibit to our Registration Statement on Form SB-2 filed on January 9, 2003.

(6)		Previously filed as an exhibit to our Current Report on Form 8-K filed on January 27, 2003.

(7)		Previously filed as an exhibit to our Current Report on Form 8-K filed on August 13, 2003.

(8)		Previously filed as an exhibit to our Annual Report on Form 10-KSB filed on November 13, 2003.

(9)		Previously filed as an exhibit to our Current Report on Form 8-K filed on January 20, 2004.

(10)		Previously filed as an exhibit to our Quarterly Report on Form 10-QSB filed on December 20, 2004.

(11)		Previously filed as an exhibit to our Current Report on Form 8-K filed on February 3, 2005.

(12)		Previously filed as an exhibit to our Current Report on Form 8-K filed on March 7, 2005.

(13)		Previously filed as an exhibit to our Current Report on Form 8-K filed on September 14, 2005.

(14)		Previously filed as an exhibit to our Current Report on Form 8-K filed on August 9, 2005.

(15)		Previously filed as an exhibit to our Annual Report on Form 10-KSB filed on November 8, 2005.

(16)		Previously filed as an exhibit to our Current Report on Form 8-K filed on December 30, 2005.

(17)		Previously filed as an exhibit to our Current Report on Form 8-K filed on June 1, 2006.

(18)		Previously filed as an exhibit to our Quarterly Report on Form 10-QSB filed on June 19, 2006.

(19)		Previously filed as an exhibit to our Current Report on Form 8-K filed on January 31, 2007.

(20)		Previously filed as an exhibit to our Annual Report on Form 10-KSB on March 5, 2007

(21)		Previously filed as an exhibit to our Current Report on Form 8-K filed on April 6, 2007

(22)		Previously filed as an exhibit to our Current Report on Form 8-K filed on April 25, 2007

(23)		Previously filed as an exhibit to our Current Report on Form 8-K filed on May 11, 2007

(24)		Previously filed as an exhibit to our Current Report on Form 8-K filed on May 23, 2007

(25)		Previously filed as an exhibit to our Current Report on Form 8-K filed on June 21, 2007.

(26)		Previously filed as an exhibit to our Current Report on Form 8-K filed on July 25, 2007.

II-5


ITEM 22.	*UNDERTAKINGS*

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 a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective Registration Statement, and (iii) to include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change in 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; and (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.

The undersigned Registrant undertakes as follows: that prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this Registration Statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form.

The Registrant undertakes that every prospectus: (i) that is filed pursuant to the preceding paragraph, or (ii) that purports to meet the requirements of Section 10(a)(3) of the Securities Act and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act, 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.

Each prospectus filed pursuant to Rule 424(b) 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.

For the purpose of determining liability of the undersigned Registrant under the Securities Act of 1933 to any purchaser in the initial distribution of securities, the undersigned Registrant undertakes that in a primary offering of securities of the undersigned Registrant pursuant to a registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: (i) any preliminary prospectus or prospectus of the undersigned Registrant relating to the offering required to be filed pursuant to Rule 424; (ii) any free writing prospectus relating to the offering prepared by or on behalf of the undersigned Registrant or used or referred to by the undersigned Registrant; (iii) the portion of any other free writing prospectus relating to the offering containing material information about the undersigned Registrant or its securities provided by or on behalf of the undersigned Registrant; and (iv) any other communication that is an offer in the offering made by the undersigned Registrant to the purchaser.

II-7

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 New York City, State of New York, on February 7, 2008.

JAG MEDIA HOLDINGS, INC.


	By:	/s/ Thomas J. Mazzarisi

Name: Thomas J. Mazzarisi


	Title:	Chairman of the Board and Chief

Executive Officer

KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned officers and directors of JAG Media Holdings, Inc. hereby constitutes and appoints Thomas J. Mazzarisi, his attorney-in-fact and agent, with full power of substitution and resubstitution for him in any and all capacities, to sign any or all amendments or post-effective amendments to this Registration Statement, and to file the same, with exhibits thereto and other documents in connection therewith or in connection with the registration of the shares of common stock under the Securities Act of 1933, with the Securities and Exchange Commission, granting unto such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary in connection with such matters as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that such attorney-in-fact and agent or his substitute may 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 by the following persons in the capacities and on the date indicated.

II-9


							Pro Forma
	JAG Media			Cryptometrics(2)			Adjustments

Revenues	$	36,732		$	34,458					$	71,190

Operating expenses:
Cost of revenues		4,621			16,372						20,993
Research and development					501,864						501,864
Marketing and selling expenses		7,296			739,373						746,669
General and administrative expenses		437,227			1,052,989		$	407,917	(f)(g)		1,898,133

Totals		449,144			2,310,598			407,917			3,167,659

Loss from operations		(412,412	)		(2,276,140	)		(407,917	)		(3,096,469	)
Other income (expense):
Gain on change in value of derivative liability		1,933,938			11,658			(503,113	)(h)		1,442,483
Amortization of deferred finance costs					(155,155	)					(155,155	)
Other expense					(4,271	)					(4,271	)
Interest expense		(189,847	)		(230,404	)					(420,251	)

Income (loss) before non-recurring charges(i)	$	1,331,679		$	(2,654,312	)	$	(911,030	)	$	(2,233,663	)

Basic income (loss) before non-recurring charges per share	$	0.03								$	(0.01	)

Diluted loss before non-recurring charges per share	$	(0.01	)

Basic weighted average common shares outstanding		50,666,552									445,366,568

Diluted weighted average common shares outstanding		58,080,023									445,366,568


QUESTIONS AND ANSWERS ABOUT THE MERGER			iii
SUMMARY			1
THE COMPANIES			1
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF JAG MEDIA			7
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF CRYPTOMETRICS			9
COMPARATIVE HISTORICAL AND PRO FORMA PER SHARE DATA			10
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS			11
RISK FACTORS			12
THE MERGER			28
THE MERGER AGREEMENT			39
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION			60
INTERESTS OF RELATED PERSONS IN THE MERGER			69
SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION			70
MANAGEMENT OF JAG MEDIA (TO BE RENAMED CRYPTOMETRICS, INC.)			72
CAPITAL STOCK OF JAG MEDIA AND CRYPTOMETRICS			74
COMPARISON OF STOCKHOLDERS’ RIGHTS			76
BUSINESS OF JAG MEDIA			79
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE OF JAG MEDIA			90
STOCK OWNERSHIP OF JAG MEDIA			91
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS OF JAG MEDIA			91
MARKET FOR JAG MEDIA COMMON STOCK AND RELATED MATTERS			92
JAG MEDIA COMPENSATION DISCUSSION AND ANALYSIS			93
MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION OF JAG MEDIA FOR THE FISCAL YEARS ENDED JULY 31, 2007, 2006 AND 2005 AND THE THREE MONTHS ENDED OCTOBER 31, 2007 AND 2006			98
BUSINESS OF CRYPTOMETRICS			110
CRYPTOMETRICS’ MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF CRYPTOMETRICS FOR THE FISCAL YEARS ENDED APRIL 30, 2007 AND 2006 AND FOR THE SIX MONTHS ENDED OCTOBER 31, 2007 AND 2006			128
CRYPTOMETRICS COMPENSATION DISCUSSION AND ANALYSIS			137
PRINCIPAL STOCKHOLDERS OF CRYPTOMETRICS			138
LEGAL MATTERS			138
EXPERTS			138
WHERE YOU CAN FIND MORE INFORMATION			139
HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS OF JAG MEDIA HOLDINGS, INC. AND SUBSIDIARIES			F-1
HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS OF CRYPTOMETRICS, INC. AND SUBSIDARY			F-44
EX-5.1: OPINION OF JONES VARGAS
EX-8.1: TAX OPINION OF MORGAN LEWIS & BROCKIUS LLP
EX-23.1: CONSENT OF J.H. COHN LLP
EX-23.2: CONSENT OF SELIGSON & GIANNATTASIO LLP
EX-23.4: CONSENT OF MORGAN LEWIS


Q:		WHO CAN HELP ANSWER YOUR QUESTIONS?

A:		If you have more questions about the Merger, please contact:


(2)		Cryptometrics information is for the three months ended July 31, 2007


(2)		Cryptometrics information is for the twelve months ended April 30, 2007


		PAGE
Report of Independent Registered Public Accounting Firm		F-2

Consolidated Balance Sheets July 31, 2007 and 2006		F-3

Consolidated Statements of Operations Years Ended July 31, 2007, 2006, and 2005		F-4

Consolidated Statements of Changes in Stockholders’ Deficiency Years Ended July 31, 2007, 2006, and 2005		F-5

Consolidated Statements of Cash Flows Years Ended July 31, 2007, 2006, and 2005		F-6

Notes to Consolidated Financial Statements		F-7/25

Schedule II — Valuation and Qualifying Accounts		F-26

Condensed Consolidated Balance Sheets October 31, 2007 (unaudited) and July 31, 2007		F-27

Condensed Consolidated Statements of Operations Three Months Ended October 31, 2007 and 2006 (unaudited)		F-28

Condensed Consolidated Statement of Changes in Stockholders’ Deficiency Three Months Ended October 31, 2007 (unaudited)		F-29

Condensed Consolidated Statements of Cash Flows Three Months Ended October 31, 2007 and 2006 (unaudited)		F-30

Notes to Condensed Consolidated Financial Statements		F-31/43


	As
	Previously			Restatement			As
	Reported			Adjustment			Restated
Revenues	$	43,331		$	—		$	43,331


Operating expenses:
Cost of revenues		24,650						24,650
Selling expenses		24,262						24,262
General and administrative expenses		239,689			27,161			266,850


Totals		288,601			27,161			315,762


Loss from operations		(245,270	)		(27,161	)		(272,431	)

Other income (expense):
Gain on change in value of derivative liability		359,090			133,861			492,951
Interest income		77						77
Interest expense		(468,249	)					(468,249	)


Net loss	$	(354,352	)	$	106,700		$	(247,652	)


Basic and diluted net loss per share	$	(0.01	)				$	(0.01	)


Basic and diluted weighted average common shares outstanding		43,972,608						43,972,608


	Six Months Ended January 31, 2007									Three Months Ended January 31, 2007
	As									As
	Previously			Restatement			As			Previously			Restatement			As
	Reported			Adjustment			Restated			Reported			Adjustment			Restated
Revenues	$	101,137		$	—		$	101,137		$	57,806		$	—		$	57,806


Operating expenses:
Cost of revenues		42,132						42,132			17,482						17,482
Selling expenses		59,816						59,816			35,554						35,554
General and administrative expenses		557,508			239,106			796,614			317,819			211,945			529,764


Totals		659,456			239,106			898,562			370,855			211,945			582,800


Loss from operations		(558,319	)		(239,106	)		(797,425	)		(313,049	)		(211,945	)		(524,994	)

Other income (expense):
Loss on change in value of derivative liability		(1,997,567	)		192,532			(1,805,035	)		(2,356,659	)		58,671			(2,297,988	)
Interest income		95						95			20						20
Interest expense		(1,075,881	)					(1,075,881	)		(607,632	)					(607,632	)


Net loss	$	(3,631,672	)	$	(46,574	)	$	(3,678,246	)	$	(3,277,320	)	$	(153,274	)	$	(3,430,594	)


Basic and diluted net loss per share	$	(0.08	)				$	(0.08	)	$	(0.07	)				$	(0.07	)


Basic and diluted weighted average common shares outstanding		45,198,064						45,198,064			46,423,522						46,423,522


	Nine Months Ended April 30, 2007									Three Months Ended April 30, 2007
	As									As
	Previously			Restatement			As			Previously			Restatement			As
	Reported			Adjustment			Restated			Reported			Adjustment			Restated
Revenues	$	164,308		$	—		$	164,308		$	63,171		$	—		$	63,171


Operating expenses:
Cost of revenues		60,654						60,654			18,522						18,522
Selling expenses		71,241						71,241			11,425						11,425
General and administrative expenses		1,032,575			412,606			1,445,181			475,067			173,500			648,567


Totals		1,164,470			412,606			1,577,076			505,014			173,500			678,514


Loss from operations		(1,000,162	)		(412,606	)		(1,412,768	)		(441,843	)		(173,500	)		(615,343	)

Other income (expense):
Loss on change in value of derivative liability		(2,404,601	)		213,891			(2,190,710	)		(407,032	)		21,359			(385,673	)
Interest income		97						97			—						—
Interest expense		(1,287,001	)					(1,287,001	)		(211,070	)					(211,070	)


Net loss	$	(4,691,667	)	$	(198,715	)	$	(4,890,382	)	$	(1,059,945	)	$	(152,141)		$	(1,212,086	)


Basic and diluted net loss per share	$	(0.10	)				$	(0.11	)	$	(0.02	)				$	(0.03	)


Basic and diluted weighted average common shares outstanding		46,001,871						46,001,871			47,663,673						47,663,673


	Balance at		Charged to			Write-offs		Loss on
	Beginning of		Cost and			and		Foreign		Balance at End
	Period		Expense			Recoveries		Exchange		of Period
Allowance for doubtful accounts

July 31, 2007	$	7,500	$	—		$	—	$	—	$	7,500

June 31, 2006	$	7,500	$	—		$	—	$	—	$	7,500

June 31, 2005	$	7,500	$	—		$	—	$	—	$	7,500

Deferred tax asset valuation allowance

July 31, 2007	$	12,227,000	$	1,072,000	(1)	$	—	$	—	$	13,299,000

July 31, 2006	$	11,843,000	$	384,000	(1)	$	—	$	—	$	12,227,000

July 31, 2005	$	12,372,000	$	(529,000	)(2)	$	—	$	—	$	11,843,000


(1)		Reflects the increase in the valuation allowance associated with net operating losses of the Company.

(2)		Reflects the increase in the valuation allowance associated with net operating losses of the Company reduced by the effect of the decrease in the valuation allowance associated with the expiration of options and warrants.


	Three Months
	Ended October 31,
	2007			2006 (restated)
Revenues	$	36,732		$	43,331


Operating expenses:
Cost of revenues		4,621			24,650
Selling expenses		7,296			24,262
General and administrative expenses		437,227			266,850


Totals		449,144			315,762


Loss from operations		(412,412	)		(272,431	)

Other income (expense):
Gain on change in value of derivative liability		1,933,938			492,951
Interest income		—			77
Interest expense		(189,847	)		(468,249	)


Net income (loss)	$	1,331,679		$	(247,652	)


Basic net income (loss) per share	$	0.03		$	(0.01	)


Diluted net loss per share	$	(0.01	)	$	(0.01	)


Basic weighted average common shares outstanding		50,666,552			43,972,608


Diluted weighted average common shares outstanding		58,080,023			43,972,608


	Common Stock				Additional Paid-in		Accumulated
	Number of Shares		Amount		Capital		Deficit			Total
Balance, August 1, 2007		48,048,617	$	480	$	45,806,278	$	(60,445,668	)	$	(14,638,910	)
Amortization of unearned stock-based compensation						3,300					3,300
Effect of issuance of common stock in exchange for services		150,000		2		95,998					96,000
Shares issued on conversion of convertible debentures		4,000,000		40		1,599,960					1,600,000
Shares issued on exercise of options		905,000		9		447,542					447,551
Capital contribution from payment by prospective merger partner of the Company’s costs						230,113					230,113
Reclassification of derivative liability upon exercise of options for 655,000 shares						295,502					295,502
Net income								1,331,679			1,331,679


Balance, October 31, 2007		53,103,617	$	531	$	48,478,693	$	(59,113,989	)	$	(10,634,765	)


Report of the Independent Registered Public Accounting Firm			F - 44

Consolidated Balance Sheets — as of April 30, 2007 (restated) and April 30, 2006			F - 45

Consolidated Statements of Operations — For the years ending April 30, 2007 (restated) and 2006			F - 47

Consolidated Statements of Stockholders’ Equity for the years ending April 30, 2007 (restated) and 2006			F - 48

Consolidated Statements of Cash Flows — For the years ending April 30, 2007 (restated) and 2006			F - 49

Notes to Consolidated Financial Statements			F - 50/66

Consolidated Balance Sheets — as of October 31, 2007 and April 30, 2007 (restated)			F - 67

Consolidated Statements of Operation — For the six months ending October 31, 2007 and 2006			F - 68

Consolidated Statements of Cash Flows — For the six months ending October 31, 2007 and 2006			F - 69

Notes to Consolidated Financial Statements			F - 70/76


										Accumulated
					Additional					Other
	Common Stock				Paid-in		Accumulated			Comprehensive
	Shares		Amount		Capital		Deficit			Gain(Loss)

Balance May 1, 2005		11,197,103	$	111,971	$	31,270,971	$	(9,872,849	)	$	(75,469	)

Net loss		—				—		(6,929,981	)		—

Sale of common stock by Private Placements		774,260		7,743		6,901,057		—			—

Gain on currency exchange		—		—		—		—			97,909


Balance April 30, 2006		11,971,363		119,714		38,172,028		(16,802,830	)		22,440

Net loss		—		—		—		(9,593,733	)		—

Sale of common stock by Private Placements		10,500		105		104,895		—			—

Gain on currency exchange		—		—		—		—			120,451


Balance April 30, 2007 (as restated)		11,981,863	$	119,819	$	38,276,923	$	(26,396,563	)	$	142,891


	CONSOLIDATED			CONSOLIDATED
	31-Oct-07			30-Apr-07
	(unaudited)			(as restated)
Assets

Current Assets:
Cash and cash equivalents	$	2,541,202		$	8,953,949
Short-term Investments		2,621,377			2,621,666
Accounts receivable		185,250			142,978
Inventory		202,004			187,339
Prepaids		43,810			55,625
Deferred finance fees		284,451			594,761
Investment tax credit receivable		509,840			364,725

TOTAL CURRENT ASSETS		6,387,934			12,921,043

Capital Assets		835,959			786,864
Loans to related party		3,630,184			575,000
Intangibles		455,940			364,240
Goodwill		10,700,000			10,700,000


TOTAL ASSETS	$	22,010,017		$	25,347,147


Liabilities and Stockholders’ Equity

Current Liabilities:
Credit Line	$	1,443,883
Convertible debt		9,075,050		$	8,790,050
Derivative liability		3,163,191			3,190,006
Accounts payable and accrued liabilities		1,183,464			1,199,936
Other current liabilities		10,279			24,085

TOTAL CURRENT LIABILITIES		14,875,867			13,204,077

Stockholders’ Equity Common stock		119,819			119,819
Additional paid-in capital		38,276,923			38,276,923
Accumulated deficit		(31,646,959	)		(26,396,563	)
Accumulated gain from foreign currency		384,367			142,891

		7,134,150			12,143,070


TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	22,010,017		$	25,347,147


	Quarter Ended			Quarter Ended			Six Months Ended			Six Months Ended
	31-Oct-07			31-Oct-06			31-Oct-07			31-Oct-06
	(unaudited)			(unaudited)			(unaudited)			(unaudited)

Revenues	$	37,284		$	606,292		$	71,742		$	979,127


Cost and Expenses:
Cost of revenues		28,258			394,479			44,630			607,818
Research and development		684,770			1,053,695			1,186,634			1,833,415
Selling and marketing		1,003,715			689,113			1,743,088			1,306,802
General and administrative		618,578			673,873			1,671,567			1,460,160


		2,335,321			2,811,160			4,645,919			5,208,195


Loss from operations		(2,298,037	)		(2,204,868	)		(4,574,177	)		(4,229,068	)


Amortization of intangibles		(4,558	)					(8,829	)
Amortization of deferred finance costs		(155,155	)					(310,310	)
Gain on derivative liability		15,157						26,815
Interest and other income, net		(153,491	)		(26,053	)		(383,895	)		79,391


Net loss for the period	$	(2,596,084	)	$	(2,230,921	)	$	(5,250,396	)	$	(4,149,677	)


Weighted Basic and diluted shares outstanding		11,981,863			11,971,363			11,981,863			11,971,363
Basic and diluted loss per share	$	(0.22	)	$	(0.19	)	$	(0.44	)	$	(0.35	)

Unaudited statements are subject to final year end adjustments


		Page
ARTICLE I	THE MERGER		2
1.1	The Merger		2
1.2	Closing; Effective Time		2
1.3	Effects of the Merger		2
1.4	Post-Merger Actions		3
1.5	Further Assurances		3
ARTICLE II	EFFECT ON CAPITAL STOCK; SURRENDER OF CERTIFICATES AND PAYMENT		3
2.1	Effect on Capital Stock		3
2.2	Exchange of Company Shares and Surrender of Stock Certificates		5
2.3	Distributions with Respect to Unexchanged Company Shares		7
2.4	No Further Ownership Rights in Company Common Stock		7
2.5	Lost, Stolen or Destroyed Certificates		7
2.6	Dissenters’ Rights		8
2.7	Withholding		8
2.8	Company Stock Options		8
2.9	Company Warrants		9
2.10	Company Exchangeable Shares		9
ARTICLE III	REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL STOCKHOLDERS		10
3.1	Principal Stockholders’ Authority Relative to the Operative Agreements		10
3.2	Execution; Enforceability		10
3.3	Title to Securities of Company		10
3.4	No Conflicts		10
3.5	Governmental Approvals and Filings		11
3.6	Legal Proceedings		11
3.7	Other Negotiations; Brokers		11
ARTICLE IV	REPRESENTATIONS AND WARRANTIES OF COMPANY		12
4.1	Organization and Good Standing		12
4.2	Capitalization		12


		Page
4.3	Subsidiaries of Company		14
4.4	Authority and Enforceability		15
4.5	No Conflict; Authorizations		15
4.6	Financial Statements		16
4.7	No Undisclosed Liabilities		17
4.8	Taxes		17
4.9	Compliance with Law		20
4.10	Authorizations		20
4.11	Title to Personal Properties		21
4.12	Condition of Tangible Assets		21
4.13	Real Property		21
4.14	Intellectual Property		22
4.15	Absence of Certain Changes or Events		26
4.16	Contracts		27
4.17	Litigation		29
4.18	Employee Benefits		29
4.19	Labor and Employment Matters		32
4.20	Environmental		33
4.21	Related Party Transactions		36
4.22	Insurance		36
4.23	Brokers or Finders		36
4.24	No Illegal Payments		36
4.25	Information Supplied		37
4.26	Antitakeover Statutes		37
4.27	Compliance with Securities Laws		37
ARTICLE V	REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB		37
5.1	Organization and Good Standing		37
5.2	Capitalization		38
5.3	Subsidiaries of Parent		39


		Page
5.4	Authority and Enforceability		40
5.5	No Conflicts; Authorizations		41
5.6	SEC Filings; Financial Statements		41
5.7	Taxes		42
5.8	Compliance with Law		44
5.9	Authorizations		44
5.10	Title to Personal Properties		45
5.11	Condition of Tangible Assets		45
5.12	Real Property		45
5.13	Intellectual Property		45
5.14	Absence of Certain Changes or Events		48
5.15	Contracts		49
5.16	Legal Proceedings		51
5.17	Employee Benefits		51
5.18	Labor and Employment Matters		54
5.19	Environmental		54
5.20	Interim Operations of Merger Sub		55
5.21	Related Party Transactions		56
5.22	Insurance		56
5.23	Brokers or Finders		56
5.24	No Illegal Payments		56
5.25	Information Supplied		56
5.26	Antitakeover Statutes		57
5.27	Compliance with Securities Laws		57
5.28	Inclusion of Subsidiaries		57
ARTICLE VI	COVENANTS RELATING TO CONDUCT OF BUSINESS		57
6.1	Conduct of Business by Company		58
6.2	Conduct of Business by Parent		60
6.3	Exclusivity		62
ARTICLE VII	ADDITIONAL AGREEMENTS		65


		Page
7.1	Proxy Statement; Registration Statement		65
7.2	Other Filings and Disclosure Schedules		67
7.3	Meeting of Stockholders		67
7.4	Access to Information		68
7.5	Consent of Company Stockholders		68
7.6	Regulatory Approvals		68
7.7	Public Announcements		69
7.8	Indemnification		69
7.9	Tax Free Reorganization		70
7.10	Listing		70
7.11	Affiliates		70
7.12	Consents		70
7.13	Notification of Certain Matters		71
7.14	Conveyance Taxes		71
7.15	Maintenance of Registration Statements		71
7.16	Termination Prior to Effective Time		71
7.17	Further Assurances		72
ARTICLE VIII	CONDITIONS TO MERGER		72
8.1	Conditions to Each Party’s Obligation to Effect the Merger		72
8.2	Conditions to Obligations of Parent and Merger Sub to Effect the
	Merger		72
8.3	Conditions to Obligation of Company to Effect the Merger		73
ARTICLE IX	TERMINATION		74
9.1	Termination		74
9.2	Effect of Termination		76
9.3	Remedies		76
ARTICLE X	MISCELLANEOUS		76
10.1	Notices		76
10.2	Survival		77
10.3	Amendments and Waivers		77


		Page
10.4	Fees and Expenses		78
10.5	Successors and Assigns		78
10.6	Governing Law		78
10.7	Consent to Jurisdiction		78
10.8	Counterparts		79
10.9	Third Party Beneficiaries		79
10.10	Entire Agreement		79
10.11	Captions		79
10.12	Severability		80
10.13	Specific Performance		80
ARTICLE XI	DEFINITIONS		80
11.1	Definitions		80
11.2	Other Defined Terms		82
11.3	Interpretation		85

Exhibits:

Exhibit A	Company Voting and Lock Up Agreement
Exhibit B	Certificate of Merger
Exhibit C	Affiliate Agreement

Schedules:

Parent Disclosure Schedule
Company Disclosure Schedule


Acquisition Transaction		6.3	(a)
Action		4.17
Affiliate Agreement		2.2	(h)
Agent		6.3	(a)
Agreement	Preface
Audited Financial Statements		4.6	(a)
Balance Sheet		4.6	(b)
Balance Sheet Date		4.6	(b)
Benefit Plan		4.18	(a)
CERCLA	4.20(a)(iv)
Certificates		2.2	(b)
Change of Recommendation		6.3	(c)
Charter Documents		4.1
Closing		1.2
Closing Date		1.2
Code	Recitals
Company	Preface
Company Benefit Plan		4.18	(a)
Company Broker Fee		4.23
Company Common Stock		2.1
Company Consents		4.5	(a)
Company Disclosure Schedule	Preamble Article IV
Company ERISA Affiliate		4.18	(a)
Company Exchangeable Share		2.10
Company Foreign Plans		4.18	(r)
Company In-Bound Licenses		4.14	(c)
Company Intellectual Property		4.14	(f)
Company Lease		4.13	(c)
Company Leased Real Property		4.13	(a)
Company Material Contracts		4.16	(b)
Company Minor Contracts		4.16	(e)
Company Out-Bound Licenses		4.14	(d)
Company Owned Intellectual Property		4.14	(b)
Company Owned Real Property		4.13	(a)
Company Owned Software		4.14	(n)
Company Pension Plan		4.18	(b)


Company Policies		4.22
Company Registered Items		4.14(g)
Company Share		2.1(a)
Company Stockholder		2.1
Company Stockholder Approval		4.4(a)
Company Stock Option		2.8
Company Lock-Up and Voting Agreements	Recitals
Company Warrant		2.9
Confidentiality Agreement		7.5
Constituent Corporations		1.1
Containment		4.14	(n)(v)
Copyrights		4.14	(a)(v)
DGCL		1.1
Disabling Code		4.14	(n)(v)
Dissenting Shares		2.6(a)
Effective Time		1.2
Environment		4.20(a)(i)
Environmental Action	4.20(a)(ii)
Environmental Clean-Up Site	4.20(a)(iii)
Environmental Laws	4.20(a)(iv)
Environmental Liabilities		4.20	(a)(v)
Environmental Permit	4.20(a)(vi)
ERISA		4.18(a)
Exchange Act		5.5(b)
Exchange Agent		2.2(a)
Exchange Fund		2.2(a)
Exchange Multiple		2.1(a)
Financial Statements		4.6(a)
Form S-4 Registration Statement		3.5(b)
GAAP		4.6(b)
Hazardous Substances	4.20(a)(vii)
HSR Act		4.5(b)
Indemnified Parties		7.8
Intellectual Property		4.14(a)
Intellectual Property Rights		4.14	(a)(v)
Interim Balance Sheet		4.6(b)
Interim Balance Sheet Date		4.6(b)
Interim Financial Statements		4.6(a)


Liabilities		4.7
Liens		3.3
LTIP		7.15
Marks		4.14	(a)(v)
Merger		1.1
Merger Consideration		2.1(a)
Merger Sub	Preface
Merger Sub Common Stock		5.2(b)
Notice Period	6.3(c)(iii)
Other Antitrust Laws		4.5(b)
Other Company Purchase Rights		4.2(d)
Other Parent Purchase Rights		5.2(d)
Parent	Preface
Parent Authorized Name Change		5.4
Parent Authorized Stock Increase		5.4
Parent Benefit Plan		5.17(a)
Parent Broker		5.23
Parent Broker Fee		5.23
Parent Common Stock		2.1
Parent Consents		5.5(a)
Parent Disclosure Schedule	Preamble Article V
Parent ERISA Affiliate		5.17(a)
Parent Foreign Plans		5.17(r)
Parent Intellectual Property		5.13(e)
Parent In-Bound Licenses		5.13(b)
Parent Lease		5.12(c)
Parent and Subsidiary Leased Real Property		5.12(a)
Parent Material Contracts		5.15(b)
Parent Minor Contracts		5.15(e)
Parent Out-Bound Licenses		5.13)c)
Parent Owned Intellectual Property		5.13(a)
Parent and Subsidiary Owned Real Property		5.12(a)
Parent Pension Plan		5.17(b)
Parent Policies		5.22
Parent Preferred Stock		5.2(a)
Parent Registered Items		5.13(f)
Parent SEC Reports		5.6(a)
Parent Series 2 Class B Common Stock		5.2(a)


Parent Series 3 Class B Common Stock		5.2(a)
Parent Stockholder Approval		5.4
Parent Stockholders’ Meeting		5.4
Parent Stock Options		5.14(d)
Patents		4.14	(a)(v)
PCBs		4.20(i)
Permitted Liens		4.11(a)
Principal Stockholders	Recitals
Proprietary Information		4.14	(a)(i)
Proxy Statement		5.25
Public Software	4.14(n)(vi)
RCRA	4.20(a)(iv)
Release	4.20(a)(viii)
Replacement Option		2.8
Replacement Warrant		2.9
Representatives		7.4
S-8 Registration Statement		7.15
SEC		3.5(b)
Securities Act		2.2(h)
Software	4.14(a)(iv)
Superior Proposal		6.3(b)
Surviving Corporation		1.1
Systems		4.14	(n)(v)
Tax		4.8	(a)(i)
Taxing Authority	4.8(a)(iii)
Tax Returns	4.8(a)(ii)
Third Party Proposal		6.3(a)
Outstanding Company Common Stock		2.1
Outstanding Company Common Share		2.1
WARN Act		4.19(d)


Sincerely yours,




JAG MEDIA HOLDINGS, INC.		AGREED AND ACCEPTED: CRYPTOMETRICS ACQUISITION, INC.

By: /s/ Thomas J. Mazzarisi Name: Thomas J. Mazzarisi Title: Chairman & CEO Date: January 25, 2007		By: /s/ Thomas J. Mazzarisi Name: Thomas J. Mazzarisi Title: President Date: January 25, 2007

AGREED AND ACCEPTED: CRYPTOMETRICS, INC.		*The undersigned agrees to act as “Escrow Agent” pursuant to the provisions of paragraph 10 above*

		KARLEN & STOLZAR, LLP

By: /s/ Robert Barra Name: Robert Barra Title: Co-CEO Date: January 26, 2007		By: /s/ Michael I. Stolzar Name: Michael I. Stolzar Title: Partner Date: January 26, 2007

		*The undersigned are signing this agreement only with respect to their obligations set forth in paragraph 12 above*

/s/ Robert Barra Robert Barra Dated: January 26, 2007		/s/ Thomas J. Mazzarisi Thomas J. Mazzarisi Dated: January 25, 2007

/s/ Michael Vitale Michael Vitale Dated: January 26, 2007		/s/ Stephen J. Schoepfer Stephen J. Schoepfer Dated: January 25, 2007


Sincerely yours, JAG MEDIA HOLDINGS, INC.
By:	/s/ Thomas J. Mazzarisi
	Name:	Thomas J. Mazzarisi
	Title:	Chairman & CEO
	Date:	April 2, 2007


AGREED AND ACCEPTED: CRYPTOMETRICS, INC.
By:	/s/ Robert Barra
	Name:	Robert Barra
	Title:	Co-CEO
	Date:	April 4, 2007


KARLEN & STOLZAR, LLP
By:	/s/ Michael Stolzar
	Name:	Michael I. Stolzar
	Title:	Partner
	Date:	April 2, 2007



/s/ Thomas J. Mazzarisi
Thomas J. Mazzarisi
Dated: April 2, 2007